Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

PRIVATE BUSINESS

PETERBOROUGH DEVELOPMENT CORPORATION BILL [Lords]

PRESTON BOROUGH COUNCIL BILL [Lords]

Read the Third time and passed, with amendments.

WALLERAWANG COLLIERIES, LIMITED BILL [Lords]

Read the Third time and passed, without amendment.

GREATER LONDON COUNCIL (GENERAL POWERS) BILL

As amended, considered; to be read the Third time.

HUMBERSIDE BILL [Lords] (By Order)

Order for consideration, as amended, read.

To be considered upon Thursday.

Oral Answers to Questions —

Mr. Speaker: I make the appeal that any hon. Member who is called for a supplementary question should not make an argument but should ask a question.

EDUCATION AND SCIENCE

School Leavers (Higher Education)

Mr. Alexander: asked the Secretary of State for Education and Science by what percentage the number of school leavers applying for higher education courses starting in autumn 1981 has increased over the figures for 1980.

The Secretary of State for Education and Science (Mr. Mark Carlisle): By 31 March 1981 the number of applications from home candidates for undergraduate courses in United Kingdom universities was 4 per cent. greater than the number received by the same date last year. No comparable figures are available for the rest of higher education.

Mr. Alexander: Will my right hon. and learned Friend confirm that every opportunity is taken at school to stress the great advantages of higher and further education of pupils if they are to achieve satisfying and satisfactory lives? If there are problems for pupils in obtaining admission to universities, is there scope for them to gain admission to polytechnics?

Mr. Carlisle: On the last part of the question, the details that we have show that there is some reduction in

the number of applications for places at polytechnics and other colleges of further education, as against the number last year.
On my hon. Friend's general supplementary question, I reply "Yes, of course". I believe that we should make it clear that further training of all kinds is in the interests of all young people in Britain. I hope that as many as possible will stay on in full-time education beyond the age of 16.

Mr. Ashley: How can the Secretary of State be so sanguine about applications for higher education when there is deep anger and resentment in universities such as Keele university, in North Staffordshire, at the savage discrimination shown by him and the University Grants Committee in the exorbitant cuts? Will he reconsider those cuts and, equally importantly, avoid provoking student riots to supplement the present riots in our cities?

Mr. Carlisle: I did not think that I was being particularly sanguine. I realise that the reduction in expenditure on universities is bound to have some effect on the numbers of students. As regards Keele, we debated the whole matter last week. As the right hon. Gentleman knows, I said then—and I repeat it—that the decision on how to divide the money between universities is a matter for the UGC, and not for me.

Sir William van Straubenzee: Referring to a comment made earlier by my right hon. and learned Friend, is it possible to say whether there has been any trend in the staying on at school of those who would otherwise become the school leavers mentioned in the question?

Mr. Carlisle: We have indications from many parts of the country that there appears to be an increase in the numbers of pupils intending to stay on beyond the age of 16 this year compared with last year.

Mr. Christopher Price: As regards entry to higher education, will the Secretary of State now confirm that the Government have formally abandoned the Robbins principle—that all young people who are qualified and who wish to enter higher education should be able to do so? If the Government have abandoned that principle, what new principle do they intend to put in its place?

Mr. Carlisle: The hon. Gentleman must realise that the Robbins principle, in that respect, has not been achieved since the Robbins report was made. The numbers in universities and higher education have been increasing steadily, but the participation rate has always been considerably lower than the Robbins report assumed. The report dealt not only with universities but with higher education as a whole. The principle that I would set out is that the Government want as many people as possible in universities and colleges of higher education, commensurate with the resources that we can make available for such education.

Independent Preparatory Schools

Mr. Thornton: asked the Secretary of State for Education and Science what are the savings to public expenditure by the increase last year in the number of children joining independent preparatory schools.

The Under-Secretary of State for Education and Science (Mr. Neil Macfarlane): The number of pupils aged between 5 and 12 in independent schools of all kinds was 6,500 higher in January 1980 than a year previously.


The average recurrent cost of educating that number of pupils in maintained schools this year is estimated to be about £4 million.

Mr. Thornton: I thank my hon. Friend for that reply. Has he had the doubtful privilege of reading a book called "Private Schools" issued by the Labour Party? Does he agree that the savings to the public purse that he has instanced are a tiny proportion of the estimate of at least £1,500 million that would be the cost if the Labour Party's plans were implemented? Does this not constitute a most vicious attack on parental choice?

Mr. Macfarlane: My hon. Friend is right. I have to disabuse him about my having read the document, but I have read press reports about it, as have my colleagues on the Government Front Bench. Everyone in the country has a right to be deeply concerned about this intrusion on freedom. My hon. Friend referred to the likely cost of £1,500 million if this so-called 10-year programme were to be implemented. It could be in excess of that figure. In addition, about £400 million is now saved to the taxpayer by parents who send their children to independent schools.

Mr. Freud: Even the £4 million, let alone the £400 million, that is saved would be useful to pay for the integrated education provisions which the Warnock report recommended and for which the Government have not voted any money.

Mr. Macfarlane: There are many purposes to which any savings in the education service could be directed. Those who have read press reports of the joint document issued by the Labour Party and the TUC will realise that it is thoroughly irresponsible. As usual, the Shadow spokesman on education is leading with his mouth rather than with his brain. In many cases he has not acknowledged the massive cost or the massive injection of money from overseas pupils at independent schools. About 35,000 pupils a year come to this country, representing a significant contribution to our balance of payments.

Mr. Field: If the Minister is so confident on this issue, will he accept the challenge by the Opposition and publish a detailed paper on the supposed savings to public funds? Will he detail in that paper the handsome subsidies that many parents who use the private sector of education get from the tax system? Will he also detail the large subsidies that local authorities give to the private sector through buying places in that sector? At a time when there is rioting in the streets of many of our cities, does the hon. gentleman not see the cost to the community of an education system which divides children on the basis of class rather than strengthens their common humanity?

Mr. Macfarlane: The only divisiveness comes from the Opposition Benches. On frequent occasions in the past 18 months my right hon. and learned Friend and I have published figures of the estimated savings and the estimated cost to the Government of pupils entering independent education. There is no question of the Government's publishing a paper. Those figures have always been readily available to the nearest approximation when requested by Opposition Members.

Mr. William Shelton: Does my hon. Friend agree that the increased number of students receiving private

education must, unhappily, be a reflection on the maintained sector, since parents are prepared to pay so much to send their children to private schools?

Mr. Macfarlane: I wish to make it clear that the independent and the maintained sectors can help each other. There are no doubt many reasons why this figure has grown over the past 18 months to two years. We are the party of freedom of choice, and we believe that parents should be allowed to spend their money how they wish. In Committee last year, my hon. Friend the Member for Brent, North (Dr. Boyson) and I listened to the hon. Member for Bedwellty (Mr. Kinnock) talking about compassion and freedom. That was pure claptrap and humbug.

Nursery Education

Mr. Campbell-Savours: asked the Secretary of State for Education and Science whether, pursuant to his reply to the hon. Member for Coventry, South West (Mr. Butcher) Official Report, 16 June, c. 849, he will ensure that the Government will provide for the continuance of the increase in the number of children in nursery classes.

The Under-Secretary of State for Education and Science (Dr. Rhodes Boyson): Our allocation to local authorities for capital expenditure on education building allows for the provision of about 2,000 new nursery places per year, which should cater for about 4,000 children.

Mr. Campbell-Savours: Does the Minister accept that a positive programme of nursery education would help to stabilise the inner cities and the declining industrial areas of the United Kingdom? Does he further accept that some parents in these unfortunate areas need guidance and some form of parental training to assist them in these difficult times? Does he also accept that the introduction of early education might enable him to forge a worthwhile link between parents and institutions of the State?

Dr. Boyson: The Government, like the previous two Governments, have tried to help nursery education within the resources available. Giving priority to nursery education for the handicapped and those in city centre areas with intense problems is a policy that we shall continue.

Mr. Stokes: Would not a better solution be for nursery classes to be somewhat curtailed so that working mothers could spend more time with their children, improve family life and help to reduce unemployment'?

Dr. Boyson: The Government have said that we shall move towards the provision of nursery education for those parents who desire it. I take the point made by my hon. Friend. In the long run, the only way to solve childhood delinquency is by strengthening, not weakening, the family. That should never be forgotten.

Mrs. Renée Short: As the Government are being educated about Labour Party policy after the next election, does the hon. Gentleman not consider that it is about time that nursery education was made part of the State system for all children aged 3 to 5 whose parents need and want it?

Dr. Boyson: The simple answer is "No". The Government have said that nursery education should be


provided for those who want it. It should not be compulsory for those who do not want it. The best pupil-teacher ratio of all is one parent to one child at home.

University Income

Mr. Beith: asked the Secretary of State for Education and Science what is the latest estimate of the total reduction in university income resulting from both the overseas student fees policy and the decrease in the recurrent grant.

Mr. Mark Carlisle: The reduction in universities' total income for 1980–81 as a result of the overseas students fees policy and the reduction in recurrent grant is provisionally estimated to be about £30 million, or less than 2½ per cent. of universities recurrent income. No reliable estimate is available of the reduction in universities' total income for 1981–82 because of uncertainties about student numbers and fee income.

Mr. Beith: Is the right hon. and learned Gentleman aware that estimates of £55 million have been made as the possible reduction caused by the policy on overseas students' fees? Even if it is less, can he honestly state any purposes of public policy that are served by the Government's intentions on overseas students?

Mr. Carlisle: Of course I can. The answer, as I have made clear, is to reduce the indiscriminate subsidy going from the taxpayer to all overseas students, irrespective of their personal financial situation and of the wealth or otherwise of the countries from which they come.

Mr. Rhodes James: Has the attention of my right hon. and learned Friend been called to an article by Lord Balogh in The Daily Telegraph yesterday, which calls for a complete review of higher and further education as a whole? Does this not fit in neatly with the contribution made to the debate last Wednesday by the hon. Member for Cambridge?

Mr. Carlisle: I listened to my hon. Friend's speech last Wednesday—which I thought was extremely good—and I shall read with interest Lord Balogh's article, which I am sure will be equally good.

Mr. Whitehead: If, as the universities calculate, the cuts over the next three years will mean an excess of 17 per cent. and a fall of 20,000 in student numbers, will the Minister say what the DES has done to calculate two further figures? First, how many students next year and the following year will not now get university places, and what will happen about those who have already been given conditional acceptances? Has the Department any information on whether those acceptances are valid in law, or what will be position be? Finally, will the Minister say what the position is on the buying out of the academic staff who have now been made redundant? Is he aware that figures have been brought to our attention suggesting that those amounts may be 10 times more than the paltry sum that has been set aside by the Government?

Mr. Carlisle: The hon. Gentleman asked many questions, and I shall do my best to answer them.

Mr. Speaker: Order. The ration is one.

Mr. Carlisle: I feel, Mr. Speaker, that I should ask the hon. Gentleman to choose which one. However, I shall try to deal with them all.
I hope that it will be possible for all conditional offers of places to be honoured.
In answer to the hon. Gentleman's question about numbers, we have gone no further than we went in this year's White Paper. We believe that the total student population this year will be 265,000. I accept that the UGC's proposals would mean that by the year 1984–85 there would be 20,000 fewer students than there are at present in universities, thus bringing the numbers back to what they were in 1977–78. I am not prepared to say now what effect that will have on entries, because, as I said last week, last year I was told in advance by vice-chancellors that level funding would mean a large drop in entries, yet 7,000 more students got in. Therefore, I am not prepared to make an assessment in that regard at this stage.

Mr. Robert Hughes: Is the Secretary of State aware that the principal of Aberdeen university has described the Government's proposals through the UGC as a sin against knowledge and has likened the effects of Government policy to the educational vacuum that followed the Chinese cultural revolution and the book-burning in Nazi Germany? Faced with such savage criticism by a very moderate person, will he think again about the cuts in university finances?

Mr. Carlisle: If the vice-chancellor made those statements—

Mr. Hughes: The principal.

Mr. Carlisle: The principal seems to be guilty of the exaggeration that one normally expects from the hon. Member for Aberdeen, North (Mr. Hughes).

Secondary Education (Selection)

Mr. Dykes: asked the Secretary of State for Education and Science what representations he has received from members of the public and interested parties on the different methods of selection for places in secondary schools conducted by local authorities by geographical, catchment-area, transport, and sibling-related criteria.

Mr. Macfarlane: Local education authorities are free to make their own arrangements for admissions to schools in their area, and in general my right hon. and learned Friend has no role to play in this. However, the matters mentioned by my hon. Friend are often raised in the context of individual admission cases and occasionally by objectors to proposals made by local education authorities under sections 12 and 13 of the Education Act 1980.

Mr. Dykes: I thank my hon. Friend for that answer. It is, of course, a matter for local authorities to determine. However, would he consider it a good idea for the Department to give guidance about the design, style and content of the forms which parents have to fill in at the initial stage? Will he further consider the possibility of modernising and improving the appeals procedure and the option of parents being interviewed, at least for the first part of their appeal, so that their up-to-date views can be heard?

Mr. Macfarlane: That theme was an integral part of the Education Act 1980. All those criteria are echoed not only in the Act, but in the regulations which are about to be issued. They are all important factors. The intention of the 1980 Act was to pursue those important objectives.

Mr. Spearing: Does the Minister agree that all the matters about which the hon. Member for Harrow, East (Mr. Dykes) complains were foretold and forewarned in the Committee stage of that legislation, and that the problems have all come home to roost?

Mr. Macfarlane: Not at all. There was much exaggeration on the part of the hon. Member for Newham, South (Mr. Spearing) in Committee on that Bill. The matters to which my hon. Friend the Member for Harrow, East (Mr. Dykes) referred form an integral part of the intention of the Education Act 1980 that parents should be fully involved.

School Grants (16 to 19-year-olds)

Mr. Skinner: asked the Secretary of State for Education and Science if he will now introduce a system of school grants for 16 to 19-year-olds; and if he will make a statement.

Mr. Macfarlane: The Government are keeping the arrangements for financial support for 16 to 19-year-olds under review but have no plans at present for changes.

Mr. Skinner: Does the Minister realise that there are many advantages in using the 16 to 19-year-olds' school grant as part of a package to reduce the impact of unemployment? Is he aware that there is no sense in sending school leavers on to a saturated labour market, some of them ending up as part of the slave labour trade in the Manpower Services Commission's scheme at £23·50 a week? Would it not be sensible to keep those who want to stay on, on a voluntary basis, under the school grant system, thus providing for a few more skilled teachers to be employed?

Mr. Macfarlane: At the beginning of the hon. Gentleman's question I thought that he was serious about this important issue. However, as usual, unhappily, some of his comments became a little destructive and perhaps jaundiced.
As regards the maintenance allowance for 16 to 19-year-olds, the hon. Gentleman should understand that there is insufficient evidence so far of a direct correlation between financial support and increased numbers of pupils staying on in education and further training. It is true that many local authorities pay education maintenance allowances. It may interest the House to know that in 1979–80 Derbyshire paid about £26,000 for those in school education and about £55,000 for those who stayed in further education. That shows that local authorities do provide maintenance allowances.

Mr. Foster: Does the Minister agree that there is now a positive financial incentive for young people to leave school at the earliest opportunity? Does he further agree that in areas such as the North-East, where participation rates are particularly low, education maintenance allowances would be an essential element in encouraging many more young peole to stay on at school, thus avoiding going on to the unemployment registers?

Mr. Macfarlane: The hon. Gentleman has a detailed understanding of the problem, and I pay tribute to him for that. My right hon. and learned Friend and I and other Ministers have made clear our objectives regarding maintenance allowances. We believe that it is important for young people to stay on in education for as long as they

can. It is worth noting that in England and Wales £3·7 million was paid in 1979–80 by local education authorities in maintenance allowances. That is not an insignificant sum in school education.

Universities (Subject Courses)

Mr. Neubert: asked the Secretary of State for Education and Science which subject courses he expects will be most affected as a result of the decisions of the University Grants Committee following the reduction of Government grant to the universities.

Mr. Montgomery: asked the Secretary of State for Education and Science what is the expected reduction in the number of university students over the next five years in courses of science and engineering; and what is the comparable figure for students of the humanities.

Dr. Boyson: The student number targets set by the University Grants Committee on the basis of its allocation of grant for 1981–82 and its provisional indications to 1983–84 provide for a fall of 8·4 per cent. in the number of arts-based students and a fall of 1 per cent. in the number of science-based students, compared with 1979–80. Within this overall reduction, however, the Committee has provided for increases in medicine, in physical and mathematical sciences, and in engineering and technology.

Mr. Neubert: Does my hon. Friend accept that if the rationalisation of university finance on which the Government have embarked results in a reduction in the endless surfeit of sociologists and social scientists, he will be popular with many people? Will he confirm that it will also strenthen the country's scientific and technological base, on which much of our future prosperity must depend?

Dr. Boyson: I can assure my hon. Friend that it strengthens the technological base. There is an increase of 2 per cent. in engineering and technology, an increase of 3 per cent. in mathematics, and an increase of 7 per cent. in physical sciences. Cuts are being made not on subjects which are going to be needed in greater numbers in the future but on subjects which are possibly going to be in less national demand.

Mr. Montgomery: Does my hon. Friend agree that we should maintain the number of technological places in our universities? I draw to his attention the plight of Salford university, which is having to resort to very severe cuts? Should not the University Grants Committee be compelled to explain the reasons for its actions?

Dr. Boyson: I appreciate the strength of my hon. Friend's feelings about Salford. The remit of the University Grants Committee is the rationalisation of provision. If every university in the country provided laboratories and libraries in every subject, the cost would be tremendous. The UGC has looked at the matter nationally. It has increased the number of technological and science students by rationalisation and by ensuring that the money goes as far as possible.

Mr. Dalyell: Does the Minister agree with what the UGC has done at Aston, Bradford and Salford?

Dr. Boyson: I am glad that the hon. Gentleman asked that question. We support what the University Grants


Committee has done. A lump sum goes to "the UGC" as it has done every year since 1919. By convention we accepted, as we always have, the advice which it has given us. Nationally, there is no doubt that the money will be spent more efficiently, although I appreciate the hard feelings that must be felt by people in areas which are the subject of rationalisation.

Mr. Dalyell: rose—

Mr. Speaker: Order. I shall call the Front Bench Member but that means that I shall not be able to call as many Back 13enchers as I would have done.

Mr. Dalyell: Will the Minister answer my question?

Dr. Boyson: I thought that I had answered it. I said that the Government support the decisions made by the University Grants Committee. Nationally, there is no doubt that the money will go further and be spent more effectively. I am not commenting on every decision made by the University Grants Committee. If we did that, we might as well do the lot ourselves and not leave it to the UGC.

Mr. Beith: Did the UGC not make it clear, rightly or wrongly, that it wanted the numbers of social studies students to be reduced but that it wished staff numbers to remain the same and for more research to be done?

Dr. Boyson: I am grateful to the hon. Gentleman for reminding me that the UGC has said that the student ratio for social studies is so high that research is not being done. By decreasing the number of students on the social science side, the research level will be raised. The hon. Gentleman is right.

Later—

Mr. Arthur Lewis: On a point of order, Mr. Speaker. May I refer to the remark that you made when most of those now present were not in the Chamber? Rightly, we make no objection when you give preference to Front Benchers, especially those sitting on the Opposition Front Bench, who often do not table questions but come in on hon. Members' questions. But then they take liberties by asking three or four supplementary questions, thus infringing the rights of hon. Members who have taken the trouble to table questions. With respect, Mr. Speaker, this matter is within your control. I have heard you, rightly, stop Back Benchers from asking more than one supplementary question. May I ask you to ensure that there are fair shares for all, including Front Benchers?

Mr. Speaker: As the House will probably have noticed, I was making a conscious effort to try to reach question No. 4 at least during Prime Minister's questions. I was hoping to achieve that today. The hon. Member for Newham, North-West (Mr. Lewis) had a substantive question on the Order Paper. I have tried to encourage substantive rather than open questions. I shall give consideration to what the hon. Gentleman said.

Mr. Wellbeloved: Further to that point of order, Mr. Speaker. Would it not expedite the passage of Question Time if the hooligans of the Right and Left were to contain themselves and allow the proceedings of Parliament to proceed along the lines set out in the many letters that you, Mr. Speaker. have received deploring the ya-boo politics of the discredited political parties?

Mr. Speaker: Order. I hope that I receive no more letters of that sort, because it is not I who am making the

noise. If such letters are sent, they should be sent to Members who represent the constituents who write the letters and not to me.

Mr. Alexander W. Lyon: Further to that point of order, Mr. Speaker. I recognise the strength of criticism about noise in the House, which is reflected in the letters that are sent to you. I hope that in your replies to the writers of such letters you indicate that noise in the House is frequently associated with genuine feeling and emotion about the conduct of the Government, and that one of the ways in which Ministers are tested and deterred from doing stupid things is by having to face a racket in the House. Anyone who has stood at the Dispatch Box knows what a salutary means of enforcing democratic rule that is. The noise that we make in the Chamber is part of the way in which we serve our constituents.

Mr. Speaker: I am obliged to the hon. Gentleman. I have stood at the Dispatch Box. I always liked the House to listen to what I had to say.

Several Hon. Members: rose—

Mr. Speaker: Order. I think that we have had enough points of order on these matters.

Mr. Winnick: On a point of order, Mr. Speaker. If we are concerned about the reputation of the House, would it not help its reputation if those elected to this place in the name of a party and who resign from that party—

Mr. Speaker: That is not a point of order for me. I suggest that we move on to the statement by the Lord Privy Seal.

Mr. James Lamond: On a point of order, Mr. Speaker.

Mr. Speaker: It will be unfair to those who have to stay late into the night if we spend our time now on issues that have not so far been points of order. If the hon. Member for Oldham, East (Mr. Lamond) is seeking to make a point of order, I hope that it is a genuine point that relates to the rules of the House.

Mr. Lamond: I make what I genuinely believe to be a proper point of order. I make it to assist you, Mr. Speaker. As one of the Back Benchers who feel exasperated when you, Mr. Speaker, in trying to be fair, have to call hon. Members representing other parties, such as the Social Democratic Party, at Question Time, may I ask, when considering whom to call, that you bear in mind, for example, the 48 questions directed to the Prime Minister that appear on the Order Paper today? None of those questions has been tabled by the Social Democrats. Will you bear that in mind, Mr. Speaker, when you are deciding who should be called?

Mr. Neville Sandelson: Go back to Moscow.

Mr. Speaker: Order. The hon. Member for Oldham, East (Mr. Lamond) may be giving me good advice.

Textbooks

Mr. Cryer: asked the Secretary of State for Education and Science if he will make a statement on the provision of textbooks in schools.

Mr. Mark Carlisle: I have nothing to add to the answer that I gave to my hon. Friend the Member for Rugby (Mr. Pawsey) and the hon. Member for Sheffield, Hillsborough (Mr. Flannery) on 16 June.

Mr. Cryer: Since the Secretary of State's inspectorate has expressed grave disquiet at the position in many secondary schools, is it not incumbent on the Minister to do something to remedy the position? Is it not disgraceful, at a time when we need to encourage the ability and talent of our young people, that the Government are denying them that opportunity through cuts in the education services, including cuts in the provision of textbooks? Does the Minister accept that, at the same time, the Government are prepared to embark on expenditure of at least between £5 billion to £6 billion to produce means of extermination? Does the Minister think that they are the best priorities?

Mr. Carlisle: In the answer on 16 June I expressed concern about the shortage of textbooks in certain parts of the country. For that reason, at least in national overall planning, we had assumed a 2 per cent. increase in rate support grant for expenditure on equipment and books. I repeat that I think that textbook expenditure is an important part of education. I shall not follow the hon. Gentleman into the latter part of his argument.

Mr. John Townend: Can my right hon. and learned Friend tell the House how the total expenditure on books compares with the cost of implementing the Labour Party's proposal to abolish private education?

Mr. Carlisle: Yes, certainly. The answer is that the overall expenditure on books in the country, at current prices, is about £60 million a year. The cost of implementing the Labour Party's proposals would be £400 million a year. Many people will feel that it is far better to spend money on books than to spend six times that amount on merely providing for the State to educate children whose parents are at the moment prepared to pay for their education.

Mr. Newens: Is it not a fact that many people who produce textbooks and cater for other needs in schools are faced with a catastrophic fall in demand for their products? What sense is there in rendering unemployed people who might produce goods for schools, when pupils are being forced to go without these goods?

Mr. Carlisle: There is nothing particularly novel in the fact that in certain areas there is a shortage of school books. Of course, if there is a shortage of school books there will have been a reduction in sales by educational book manufacturers. However, many such manufacturers have substantial markets overseas as well as in Britain. I repeat, we have assumed a slight increase in expenditure on school books. I remind the House, as I have reminded it before, that expenditure was 33 per cent. a year less when the last Government left office than when they took office.

Mr. Jessel: Will my right hon. and learned Friend look into the growing use by schools of textbooks containing questions with special spaces for the answers to be written straight into the book, which is subsequently thrown away? Does he agree that that seems extraordinarily wasteful when contrasted with the traditional method of the child writing the answer to the question either into an exercise book or on to a piece of paper, the textbook being retained and passed on to other children?

Mr. Carlisle: I am not sure why the use of such text-books should prevent pupils writing the answer into their exercise books rather than into the book itself. Clearly,

one does not want wastage of books by unnecessarily throwing them away. However, the type of textbook used must be for the individual schools and the local education authorities to decide.

Maintained Schools (Closures and Reductions)

Mr. Nicholas Winterton: asked the Secretary of State for Education and Science what importance he attaches to parental choice and expression of parental support for a school when considering proposals to reduce or close maintained schools.

Mr. Macfarlane: My right hon. and learned Friend attaches great importance to the views of parents, alongside the wide range of educational and other factors that he has to take into account when making a decision.

Mr. Winterton: Will my hon. Friend bear in mind that there is a great deal of support from parents for many schools, particularly village and denominational schools. Although there must be good reason to reduce the expected vast surplus of school places over the next few years, does the Minister agree that such places should be found from the least popular schools rather than from the most popular schools?

Mr. Macfarlane: I accept the theme of what my hon. Friend says. Each proposal is considered on its merits by my right hon. and learned Friend the Secretary of State. All those factors are taken into account in each case that comes to my Department. In relation to my hon. Friend's anxiety, he must observe that the educational content of each school is an integral part of each consideration.

Mr. Christopher Price: Does the Minister agree with the recent statement by the Archbishop of Canterbury to the Select Committee on Education, Science and Arts to the effect that if schools have to be closed, voluntary and county schools should be closed broadly in the same proportions as were the teacher training colleges?

Mr. Macfarlane: If that question is directed at me personally I must tell the hon. Gentleman that I have not read the exact evidence given. I take note of what he says.

Post-16 Age Groups

Mr. Hardy: asked the Secretary of State for Education and Science what expansion in the educational provisions for the post-16 age groups he expects during 1981–82.

Mr. Mark Carlisle: The Government's expenditure plans allow for an increase of nearly 6 per cent. between 1979–80 and 1981–82 in the numbers of post 16-year-olds staying on for full-time courses in school or non-advanced further education.

Mr. Hardy: Does the Secretary of State accept that we need to see many more young people in schools than we envisaged a year or two ago when the forecast was made? May we assume that the Government will be reviewing their priorities urgently and will, having carried out that review, greatly increase the facilities available for the 16 to 19-year-olds so that many young people who are currently unemployed will be taken off the streets?

Mr. Carlisle: I am grateful to the hon. Gentleman for the way in which he put that supplementary question. I share his view that we should do all that we can to


encourage people to stay on in full-time education. That is the best form of post 16-year-old training for young people. I am glad to say that the information that we have—and it is still early information—shows that in various parts of the country the demand for staying on has increased considerably this year. The Government are reviewing generally their plans and proposals for youth unemployment.

Mr. Kenneth Lewis: Does my right hon. and learned Friend agree that there are proposed cuts in further education because of a possible reduction in numbers? Will he discuss with his right hon. Friends the possibility of filling those places with post 16-year-olds who will be given the same advantages in pay as young people on the youth opportunities scheme, so that they can carry on with further education, just as they can take up a job in industry?

Mr. Carlisle: I am not sure that I follow my hon. Friend's question. We are anxious to see as many post 16-year-olds as possible staying on in education or training. We are aware that at present there are spare places in the colleges of further education, which we have identified. We hope that some of those places will be used for expanding and training opportunities available to young people.

Village Schools

Mr. Farr: asked the Secretary of State for Education and Science what has been the number of closures of village schools in each of the last three years; and if he will take special steps to retain them.

Dr. Boyson: In 1978 approval was given to 53 secondary and primary rural school closures, in 1979 to 26 and in 1980 to 45. My right hon. and learned Friend will continue to consider all such proposals on their individual merits, taking account of educational and other considerations, including any objections from those affected by the proposals.

Mr. Farr: I am grateful to my hon. Friend for his reply, but bearing in mind that the village school occupies a special place in our national picture, will he see whether there is any way in which a scheme can be formed so that, when a village school gets into difficulties, special steps can be taken to keep it open and alive?

Dr. Boyson: I fully understand my hon. Friend's concern on this matter. He and I have talked about it on a number of occasions. However, we must face the fact that by 1986, clue to the falling birth rate, there will be about 3 million surplus places in the schools, costing £100 per place in service and maintenance. One cannot keep every school open. It is estimated that to cut back those places would require the closure of about 1,000 primary schools, which is only 5 per cent. of the number. I take on board what my hon. Friend has said. Wherever possible, knowing the disastrous social effects of the closure of village schools, we shall encourage those which are economically able to do so to remain open.

Mr. David Watkins: Will the Minister take special steps to try to retain village and other schools in the Consett and Stanley areas of County Durham, where the Government's policy of massive industrial closures now seems to be being followed by a policy of massive school closures?

Dr. Boyson: I cannot comment on the hon. Member's point about the places that he mentions. It is likely that the closure of small primary schools will affect city areas more than rural aeas for the next five to 10 years because the inner cities are most affected educationally by a fall in population.

Mr. Wickenden: Will my hon. Friend bear in mind that one of the ways in which school closures might be avoided is by permitting parents to contribute towards the cost of that education? Many parents wish to do so, but are prevented by the contents of the Education Act 1944.

Dr. Boyson: I appreciate my hon. Friend's point. In many cases, parents wish to help, but it is important to see how that fits in with the 1944 Act.

Mr. Allen McKay: Does the Minister realise the concern of parents of children affected by school closures? Those children, already travelling 10 miles to the existing schools, will have to travel perhaps a further six miles. Will he take into consideration that some of those villages, during inclement weather, are snowbound and therefore those children will lose about five or six days' education a year?

Dr. Boyson: I certainly take note of what the hon. Member said. Any proposals come from the area. We do not propose the closures nationally. They are recommended to us. When closures are considered, questions of transport, schools being closed by inclement weather and so on are taken into consideration before my right hon. and learned Friend makes a decision.

Committee of Vice-Chancellors and Principals

Mr. Whitehead: asked the Secretary of State for Education and Science what plans he has to meet the Committee of Vice-Chancellors and Principals.

Mr. Mark Carlisle: I shall be meeting the chairman and vice-chairmen of the Committee of Vice-Chancellors and Principals tomorrow.

Mr. Whitehead: Will the Secretary of State make a particular effort to get from the CVCP the numbers of students admitted in 1980–81—which I am sure they will be willing to provide—so that we can see the real baseline for the severe cuts that he has imposed on the universities? If those figures show that the real cuts include, for example, a 44 per cent. reduction at Salford and such a figure at other universities, will he reconsider his decision earlier this afternoon and give them a supplementary grant?

Mr. Carlisle: We already have the 1980–81 figures, which I have accepted. They are about 7,000 more than the 1979–80 figures, which was the baseline used by the University Grants Committee. Those were the most up-to-date, safe figures which the committee used when it did its work.

Mr. Stokes: Is my right hon. and learned Friend aware that rationalisation of university courses is long overdue and will be accepted by most fair-minded and sensible people?

Mr. Carlisle: I entirely agree with what my hon. Friend says. We spend £1,300 million a year in current expenditure on the universities. The purpose is to get a


reduction of up to 13 per cent. to 15 per cent. in expenditure, which will make a difference of only 3 per cent. to 5 per cent. in total student numbers.

Mr. McNally: Will the Secretary of State consider seriously the proposal of the vice-chancellor of Aston that a supplementary grant should be given to the UGC and that an inquiry into educational priorities should be instigated so that universities such as Salford and Aston do not serve their sentences in advance of a trial?

Mr. Carlisle: I must make it clear to the hon. Gentleman that there can be no possibility of my giving a supplementary grant to the University Grants Committee. [HON. MEMBERS: Why not?] I am saying that there is no possibility. I know that the chairman of the University Grants Committee has offered to see the vice-chancellors of the various universities which are particularly affected.

Oral Answers to Questions — PRIME MINISTER

Engagements

Q 1. Mr. Dubs: asked the Prime Minister if she will list her public engagements for 14 July.

The Prime Minister (Mrs. Margaret Thatcher): This morning I had meetings with ministerial colleagues and others. In addition to my duties in the House I shall be having further meetings later today, and this evening I hope to have an audience of Her Majesty the Queen.

Mr. Dubs: I accept that the vast majority of people are opposed to violence and lawlessness and are in favour of better protection for the police, but does the Prime Minister realise that many people consider it a serious step indeed for the Government to contemplate the use of water cannon, CS gas and rubber bullets on the streets of British towns and cities? Now that she has returned from Liverpool, will the Prime Minister give us her assessment of the reasons for the present wave of civil disorder? Will she tell us clearly to what extent she believes that her Government's policies have been responsible?

The Prime Minister: I accept what the hon. Member said at the beginning of his supplementary question, that it is vital to have our citizens protected and to see that the law is upheld. We on the Government Benches take the view that the police must have the equipment for that purpose, and part of the legitimate equipment for chief constables to use if they decide that the situation requires it would be CS gas and water cannon. The only question is whether the chief constables wish to have water cannon among the equipment available for any task that they may face. There may be a fundamental difference, but I believe that the majority of people take the view that we on Government Benches broadly take. With regard to the reason, this is not, as someone said to me in Liverpool, yesterday, the time for detailed analysis. We have a problem. We shall not be able to deal in practice with the economic and social aspects of it until law is restored and is seen to be restored. Therefore, the two things go hand in hand.

Sir Paul Bryan: Before announcing any new long-term plans for the inner cities will the Prime Minister make sure that the general public is aware of what has already been done? Following her visit to Toxteth, will she say what has

been done there, not only in terms of expenditure but in terms of the nature of the policies and the methods of carrying them out there?

The Prime Minister: It is evident that a great deal of money has been spent in Liverpool. Much has been spent on housing, as the local authority emphasised to me. Some time ago it took the view that the best service it could do would be to clear out many of the slum houses. It has spent a good deal of its resources on doing that. Much of the housing which I saw in Toxteth is very good, as has been stated in the House before. A great deal of money is also being spent on education. The tragedy is that some of the money that has been poured into some of the big schools is now not fully used because some of the schools must be closed down as there are far fewer pupils than we ever thought. One school that I opened in 1970 for 1,700 pupils now has only 900 pupils. Money is being poured into expenditure on more teachers and on paying extra for those in the deprived areas. Therefore, I do not believe that a shortage of money has been the problem in Liverpool. This year the full expenditure in Liverpool is about £361 million.

Mr. Foot: I concur with my hon. Friend the Member for Battersea, South (Mr. Dubs). Everyone agrees that law breaking must be stopped and punished, but the way that that is done in Britain is important for the freedom of our people. Has the Prime Minister had time to study the speech made by the Home Secretary to a group of Tory Back Benchers last night? Is it a new statement of Government policy? If so, when will it be made to the House?

The Prime Minister: Statements about changes in Government policy, if there are changes, will be made in the debate on Thursday, in the usual way. I would be grateful to the right hon. Gentleman if he would make it clear whether he is actually against the use of CS gas and water cannon.

Mr. Foot: Those suggestions, and the suggestions made by the Home Secretary—only some of which are approved and supported by the police—must be properly debated in the House. [HON. MEMBERS: "Answer."] I shall not answer those questions until they have been properly debated. If the right hon. Lady wants the House to give proper consideration to these matters, I ask her, on behalf of her Government, to make a statement to the House of Commons in advance of Thursday's debate so that we can properly consider the issue. The Opposition are as determined to stamp out illegality as anyone else. However, we want to do it by fair methods that can be supported by the population and not by methods that drive a wedge between the police and the community.

The Prime Minister: The right hon. Gentleman's statement is not of very much help—[Interruption.] As I said—[Interruption.]—

Mr. Speaker: Order. Since last Thursday I have been inundated with correspondence from the public protesting at the noise during Prime Minister's Question Time. I honestly think that we do ourselves no good by such an exhibition. Everyone must be allowed to speak.

The Prime Minister: The right hon. Gentleman's statement is not of very much help or encouragement to the police when they are on the lines trying to quell a hail of stones, bricks, metal and petrol bombs. When they are


doing that they need to know that they have the full support of the Government—in particular the Home Secretary—and the full support of local authorities, and they also need the full range of equipment in case they adjudge that its use is necessary. We must bear that in mind in view of the number of police injured when carrying out their job of protecting the public.

Mr. Foot: Nothing that I have said has been any discouragement to the police in carrying out their duties. The right hon. Lady has no grounds for making any such slur. I am asking her—and I have not yet had an answer—whether the Home Secretary made an important new declaration of policy last night. When will he make that declaration in the House?

The Prime Minister: There is to be a debate in the House on Thursday on this issue. The Home Secretary will make any statement of changes in policy then. In the meantime, I trust that the right hon. Gentleman will support the police in their use of CS gas in difficult circumstances.

Mr. David Steel: Has the Prime Minister had time to study the report of the Association of Metropolitan Authorities called "Investing in Recovery"? Will she pay particular attention to the section which calls for major home improvements in inner city areas as a means of restoring employment?

The Prime Minister: I shall look at that section of the report. We are anxious that home improvement, which is an excellent way to improve the standard of housing, should continue.

Mr. Christopher Price: asked the Prime Minister if she will list her official engagements for Tuesday 14 July.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Price: Now that the Secretary of State for Employment and the Home Secretary have admitted on a number of occasions that unemployment is one of the causes of the sort of disturbances that have taken place, does not the Prime Minister think it right to withdraw the statement that she made before the Brixton disturbances, that unemployment is not a factor? As she has not yet commented on the demands from Conservative Back Benchers for the use of rubber bullets on our streets, will she make her position clear?

The Prime Minister: I have answered the hon. Gentleman's first question several times before. He has asked it several times before. The question is the same, and the answer is the same. Unemployment is a factor, but I do not believe that it is the main factor. Some of the worst riots occurred in areas where unemployment was far from being as high as in other areas.
If chief constables wish to use rubber bullets, I believe that they will have the support of my right hon. Friend the Home Secretary in having them made available.

Mrs. Knight: Is my right hon. Friend aware that a woman teacher in the pay of the Birmingham city authority is actively engaged in fomenting the present troubles and encouraging the abuse of authority? Should such a person continue in the pay of the authority that she seeks to overthrow?

The Prime Minister: I am not aware of the case to which my hon. Friend refers. My right hon. and learned Friend the Secretary of State for Education and Science would wish to receive details of that case. The local authority employs the teachers. If there are fresh facts known to my hon. Friend, I shall be grateful if she will bring them to full public attention.

Mr. Eastham: The Prime Minister is largely responsible for the riots and the damage. Will she tell the House whether she intends to refund local authorities the millions of pounds of damage that has resulted from the riots?

The Prime Minister: The hon. Gentleman's first remark is absurd and unjust. On his second point, the law is well established. The compensation provisions operate to the effect that any expenditure up to a penny rate falls on local authorities. Any expenditure above that is reimbursed by the Government.

Mr. Marlow: asked the Prime Minister whether she will list her official engagements for 14 July.

The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.

Mr. Marlow: Does my right hon. Friend have time today to tell the House what her opinion would be of the reintroduction of the Riot Act as a means both of clearing the streets and of bringing about quick, effective arid fair justice to rioters?

The Prime Minister: I agree that the Riot Act is a means of clearing the streets. It was repealed in 1967 by the then Labour Government in connection with the Criminal Law Act 1967. My right hon. Friend the Home Secretary, the Attorney-General and the Lord Chancellor are carrying out an urgent review of the law. No doubt they will announce their conclusions in due course.

Mr. Wellbeloved: Notwithstanding the political opportunism and nit-picking that masquerade as an alternative to the Prime Minister's discredited economic policies, will the right hon. Lady take note that right across the political divide between Labour and Tory the overwhelming majority of people in Britain will support the police in their struggle against the looter, the mugger, and the anarchist? Is it not a fact that we are now paying the penalty for a decade or more of undermining and subverting respect for decent authority?

The Prime Minister: I agree with both of the main points in the hon. Gentleman's supplementary question. I believe that the overwhelming majority of the British people are fully in support of the police in everything that they are doing and are very grateful to them for the way in which they are carrying out their duty. I agree with him on his second point, that a large part of the problem that we are having now has come from a weakening of authority in many aspects of life over many, many years. This has to be corrected.

Mr. Foot: May I ask the right hon. Lady afresh to consider the proposition that I made earlier that we should have a statement on the Government's proposals before the debate on Thursday? If a statement is made, there will be time for hon. Members to consider the proposals. There may be proposals that some hon. Members favour and some that they do not. If the Government want, as I believe the country requires, a cool debate on Thursday,


surely the right hon. Lady can respond to my appeal that we should have a statement from the Home Secretary before the debate takes place.

The Prime Minister: It is quite customary for a Minister to open a debate with a main speech, which is

what my right hon. Friend the Home Secretary will do. He will make a major speech in opening that debate and my right hon. Friend the Secretary of State for the Environment will be winding up. I believe that the right hon. Gentleman will find that sufficient.

European Community (Foreign Affairs Council)

The Lord Privy Seal (Sir Ian Gilmour): With your permisson Mr. Speaker, I will make a statement on the outcome of the Foreign Affairs Council held in Brussels on 13 July. My right hon. and noble Friend took the chair at this, the first Foreign Affairs Council held under the United Kingdom Presidency, and my hon. Friend the Minister for Trade and I represented Her Majesty's Government. Useful progress was made on a number of items.
There was a meeting at ministerial level between the Community and Spain in the framework of the negotiations for Spanish accession. My right hon. and noble Friend made a statement on behalf of the Community, reviewing the negotiations so far and confirming the Community's wish to intensify them and see them through to a successful conclusion. The Spanish delegation reciprocated those intentions and presented declarations on customs union, external relations and the right of establishment.
As agreed at the last meeting of the Council, there was further discussion of trade relations with Japan. The Council reaffirmed its statements of November 1980 and February and May 1981, conveying the Community's concern at the strain on the open trading system resulting from the pattern of Japanese trade. These will serve as guidelines for the Commission and those members of the Community present at the Ottawa summit.
The Council decided that the Community should join the 1980 international cocoa agreement, and emphasised its determination that existing buffer stock funds should be transferred intact by the 1975 cocoa council.
The Council endorsed the agreement reached at official level on the quantity of Yugoslav baby beef exports to be provided for in the Commission's mandate to negotiate an adaptation protocol to the EEC-Yugoslavia agreement, to take account of Greek accession to the Community. This agreement satisfactorily removes a long-standing irritant to EEC-Yugoslav relations, to which the Government attach great importance.
The Council resolved the final details of its position on the industrial customs union chapter of the negotiations on Portuguese accession. These negotiations will now be able to proceed in that sector.
The Council agreed a mandate to the Commission for the first round of substantive negotiations on the renewal of the multi-fibre arrangement for trade in textiles. This provides a basis for the negotiation of a renewed MFA consistent with United Kingdom objectives.
Finally, my right hon. and noble Friend gave his Community colleagues in political co-operation an account of his recent visit to Moscow and other reactions to the proposal for a two-stage conference on Afghanistan. The Ministers agreed that the proposal remained a realistic and constructive attempt to solve an important problem, and that there could be no question of modifying its basic principles. They invited the Presidency to continue the work of promoting this proposal.
Ministers of the Ten also discussed the CSCE review meeting in Madrid. They agreed that a balanced and

substantial conclusion should be possible before the end of this month and that the Ten should continue to work actively to achieve this.

Mr. Denis Healey: Does the Lord Privy Seal agree that the results of the first meeting under the British Presidency are pretty exiguous and fall far short of the objectives that the Foreign Secretary set himself when he announced his intentions to the European Assembly?
On Spanish accession, will he confirm that the Spanish Government dragged their feet at the meeting of the Foreign Affairs Council? What is the Government's view of the import restrictions recently imposed by Spain? Does ,the right hon. Gentleman regard them as compatible with Spain's obligations if and when she finally joins the Community?
On the visit to Moscow and the conference on Afghanistan, does the right hon. Gentleman agree that the fact that Mr. Gromyko himself, as Foreign Minister of the Soviet Union, has ruled out any progress on the Foreign Secretary's proposals gives them small chance of success? Does he also agree, however, that that in itself should not be an obstacle to early talks on arms control between the Western Powers and the Soviet Union?

Sir Ian Gilmour: I think that the achievements of the conference were modest rather that exiguous. As I have retailed to the House, some agreement was achieved. The right hon. Gentleman will be aware that there had been movements in some quarters of the House for a statement to be made after the Foreign Affairs Council. I think that it is generally agreed that this should not be done unless the proceedings are of particular interest, but it seemed that the first Foreign Affairs Council of this Presidency was a reasonable one to merit an oral statement.
As to the progress on enlargement, I agree that Spain had some reason to be disappointed that greater progress was not made. I hope that there will be greater progress in the future, but it was prevented on this occasion by the fears of one State. I agree with the right hon. Gentleman that the Spanish trading policy is open to considerable criticism. My right hon. Friend the Secretary of State for Trade, his predecessor and I have criticised it personally to the Spanish Government in the past. We shall continue to do so until the improvement which we seek takes place.
I think that the right hon. Gentleman is rather over-sour in his remarks about Afghanistan, as he was last week. I do not think that we can rule out any hope of progress. That certainly was not the view of the Ten at the meeting on political co-operation yesterday. At the same time, I agree with the right hon. Gentleman that that should be no reason why there should not be progress on arms control talks. Indeed, I hope that there will be such progress.
Finally, the right hon. Gentleman said in opening that the achievements of the Foreign Affairs Council fell far short of the objectives that my right hon. and noble Friend had set himself. As I am sure he will appreciate on reflection, that is not a very sensible remark, as my right hon. and noble Friend has been present for only a fortnight, so there has not been time for great progress.

Mr. Russell Johnston: Did the Foreign Secretary take the opportunity to tell the Spanish representatives that their rigid and old-fashioned nationalist view on Gibraltar was unhelpful in accession negotiations?
On Afghanistan, will the right hon. Gentleman draw his right hon. Friend's initiative to the attention of the Home Secretary? Is it not profoundly contradictory that a group of Afghans seeking political asylum in this country should be turned away and, to our shame, should be accepted not by us but by the Federal Republic of Germany?

Sir Ian Gilmour: On the second part of the hon. Gentleman's question, our initiative on Afghanistan certainly does not need to be brought to the attention of my right hon. Friend the Home Secretary, who is well aware of it. All questions of immigration, of course are matters for him.
On Gibraltar, we had a meeing with the Spanish Foreign Minister in the margins of the Foreign Affairs Council. It was largely about Community affairs, but we took the opportunity once again to express our hope that the frontier would soon be open. The Spanish Foreign Minister affirmed that he still stood by the Lisbon agreement.

Mr. Hugh Dykes: Did my right hon. Friend have the opportunity to deal with any bilateral matters between Spain and Britain—notably, for example, the position of British wines and British sherry? Is he satisfied that the Spanish will recognise that they need the help and good will of all member States in achieving entry to the Community and that certain bilateral vital interests of that kind can be part and parcel of the total picture?

Sir Ian Gilmour: I agree entirely with my hon. Friend. It is important that Spain should abide by its trading agreements and should move towards a more open trading posture as soon as possible. The particular commodities and matters to which my hon. Friend refers did not come up, but he will be aware that it was a very short meeting and that we therefore confined ourselves to general issues.

Several Hon. Members: rose—

Mr. Speaker: Order. I propose to call those hon. Members who have already been rising in their places.

Mr. K. J. Woolmer: Given the position in the multi-fibre arrangement negotiations, does the Minister recognise the importance of this to 600,000 textile and clothing workers in this country? Bearing in mind the firm position taken by the Secretary of State for Trade in the House and the alternative position taken in Europe at least by the Germans, can the Minister say what areas remain problematic for this country? Can he assure the House that the Secretary of State has stood firm on every major point on which he emphasised to the House that he would stand firm?

Sir Ian Gilmour: I wholly agree with the hon. Gentleman about the great importance of this matter. We are satisfied that the mandate that has been agreed is entirely consistent with the British Government's objectives as laid down by my right hon. Friend. We are certain that we have secured a sensible and realistic mandate.

Mr. Ivan Lawrence: Shall we be hearing anything more about the Venice initiative?

Sir Ian Gilmour: Yes, almost certainly, but it was not discussed at the Foreign Affairs Council yesterday.

Mr. Ioan Evans: Will the right hon. Gentleman follow up the disappointing response on Afghanistan with a further meeting with the Russians, with a wider agenda, to deal with the nuclear arms race and the need for discussions on detente and disarmament, in view of the crippling effect of arms expenditure on the economy of this country?

Sir Ian Gilmour: I think that that would be to propose summitry for summitry's sake. My right hon. and noble Friend went to Moscow and put forward sensible and realistic proposals, which have been endorsed—indeed, it was an initiative by the Ten—by many other countries and which I am sure will be supported by even more countries in the coming months. The Americans have already said that they are prepared to enter into arms control negotiations with the Russians. We greatly welcome that. However, the hon. Gentleman must realise that so long as Russia continues to behave in Afghanistan in the way that she is now behaving it will cast considerable blight on East-West relations.

Mr. Nicholas Winteron: Will my right hon. Friend be a little more specific in response to the question of the hon. Member for Batley and Morley (Mr. Woolmer) about the MFA? Will he assure the House that the commitment given by the Secretary of State for Trade in the excellent speech that he made when we debated the MFA will be the basis of any agreement on the renegotiated MFA3? Can he also assure us that during our Presidency, all Ministers of the Crown, when they lead the European Community, will ensure that the mandate given to the Secretary of State by the House on that occasion will be carried through and that the jobs of 600,000 people in the textile and clothing industries will be safeguarded as a result?

Sir Ian Gilmour: When I said at the beginning of my statement that my hon. Friend the Minister for Trade and I represented the Government, I meant that the Minister represented the Government on this issue. Of all people, he is well aware of the mind of our right hon. Friend. He was therefore negotiating with full knowledge of what the Secretary of State had said. As I have already said, we are fully satisfied with the negotiating position.

Mr. Cyril D. Townsend: Surely some consideration was given to the pursuit of the European initiative on the Middle East, which complements the Camp David agreement. Was consideration given to warning the newly elected Begin Government against any foolhardy attempt to take out the SAM missiles in the Lebanon?

Sir Ian Gilmour: No. We cannot discuss every part of the world at every Foreign Affairs Council or at every meeting on political co-operation. However, the Community's views have been well expressed, and, as my hon. Friend well knows, the Habib mission is still in being.

Mr. Nigel Spearing: The Lord Privy Seal said that this was a meeting of the Foreign Affairs Council, yet clearly the agenda trenched on a number of subjects, particularly trade. Has the custom of allocating different topics to different Departments and their equivalents in the Community been discontinued, and why was this mixture of agenda items made in this instance?

Sir Ian Gilmour: There has been no change in the procedures of the Foreign Affairs Council over the last few years. They are exactly the same as the procedures that operated under the previous Government. The matters to which I have referred have always been discussed by the Foreign Affairs Council, and so far as I know they will continue to be so in the future.

Mr. Tony Marlow: Will my right hon. Friend and his colleagues take an early opportunity to disabuse the world of the myth being put around by the Israelis that their incessant attacks upon their Arab neighbours are pre-emptive strikes? Will he confirm that the number of Arabs killed by the Israelis is many times greater than the number of Israelis killed by Arab action?

Sir Ian Gilmour: There may be a great deal in what my hon. Friend says, but he will appreciate that this is a statement about the Foreign Affairs Council yesterday, and I have already said twice that this matter did not arise.

Mr. Dennis Skinner: Did the right hon. Gentleman remind his Common Market colleagues that just over 12 months ago the Tory Government decided to warn British industrialists not to trade with Russia as a result of the invasion of Afghanistan and to call upon the British people not to participate in events in Moscow and elsewhere? Did he also remind them that a few weeks ago the same Tory Government told British industrialists to go ahead and trade with the Soviet Union? Does that mean that Tory principles last about 12 months?

Sir Ian Gilmour: No, it does not. So long as the Russians try to subjugate Afghanistan our position will not be different. We have not altered our industrial policy—

Mr. Skinner: You have.

Sir Ian Gilmour: With great respect, we have not. What was altered was the decision on grain sales to Russia, because that was done as a result of President Reagan's decision to lift his grain embargo on sales to the Soviet Union.

Mr. Albert McQuarrie: I return to my right hon. Friend's reply to the hon. Member for Inverness (Mr. Johnston) about Gibraltar and his comments about Spain's accession to the Community. Was the implementation of the Lisbon agreement discussed with the Spanish Foreign Minister, and was it made clear to him that unless the border with Gibraltar is opened long before Spain's accession, Britain will not permit her accession?

Sir Ian Gilmour: It is well within the knowledge of Foreign Ministers—as I have said many times in the House—that it would be unthinkable for two member States to have a closed border. That has been made abundantly clear. As I told the hon. Member for Inverness (Mr. Johnston), the question of Gibraltar came up briefly. My right hon. and noble Friend and I again urged the early implementation of the Lisbon agreement, and the Spanish Foreign Minister stood by that agreement. However, as my hon. Friend will know better than most, it is now about 15 or 16 months since that agreement was reached; therefore, to put it mildly, its implementation is somewhat overdue.

Mr. Healey: In view of the right hon. Gentleman's answer to my hon. Friend the Member for Bolsover (Mr. Skinner), is it not the case that the Secretary of State for Trade is now encouraging British business men to increase their exports to the Soviet Union, just as President Reagan is encouraging his agriculture producers to export grain to the Soviet Union? Does he not agree that these two reversals of policy suggest that the Conservative Administration's devotion to principle is at least modest, if not exiguous?

Sir Ian Gilmour: It is rather greater than the Labour Party's devotion to fact. There never was a ban on exports or trade to Russia. Therefore, the ban could never be lifted. There was an alteration to the COCOM rules on exports of high technology, and that has not altered at all.

Statutory Instruments, &c.

Mr. Speaker: To save the time of the House, I shall put together the three questions on the motions relating to Statutory instruments.

Ordered,
That the draft Building Societies (Authorisation) Regulations 1981 be referred to a Standing Committee on Statutory Instruments, &amp;c.
That the draft Export Guarantees (Limit on Foreign Currency Commitments) Order 1981 be referred to a Standing Committee on Statutory Instruments, &amp;c.
That the draft Export Guarantees (Limit on Sterling Commitments) Order 1981 be referred to a Standing Committee on Statutory Instruments, &amp;c.—[Mr. Newton.]

BUSINESS OF THE HOUSE

Ordered,
That the Third Reading of the Finance Bill may be taken immediately after the consideration of the Bill, notwithstanding the practice of the House as to the intervals between the stages of Bills brought in upon Ways and Means Resolutions —[Mr. Newton.]

Agricultural Tied Housing Reform (Scotland)

Mr. John Home Robertson: I beg to move,
That leave be given to bring in a Bill to improve the security of tenure of farmworkers and others who occupy agricultural tied houses in Scotland; and for connected purposes.
Whatever the hon. Member for Banff (Mr. Myles) may tell us, I should like to say at the outset that this is not a particularly revolutionary measure. Let me emphasise two points. First, it would not abolish the tied housing system altogether, but it would reform it in a constructive manner. Secondly, it would not lead to the imposition of cash rents on farm workers.
Since 1977, the tied cottage system in England and Wales has been radically reformed by the Rent (Agriculture) Act 1976. Farm workers have been given rights similar to those of other tenants, and only if two sets of circumstances apply do they need to give up their homes. Those circumstances are, first, that the farmer can prove to a balanced advisory committee, consisting of employers' and workers' representatives under an independent chairman, that there is a genuine agricultural need for him to repossess the house and, secondly, that the worker must have been offered suitable alternative accommodation, either by the farmer or by the local authority. Unless both those conditions are fulfilled, there should be no question of eviction proceedings in England and Wales.
Consideration of genuine agricultural need is important. In some cases there is no real need for a farm worker to live in a cottage on the farm. Men working regular hours as tractor men can have accommodation several miles away from the farm without their efficiency being reduced in any way—just like any other industrial worker.
However, shepherds and other stockmen, particularly on remote farms, need to be permanently on the spot, because they need to be in a position to look after the stock in their charge in all weathers. That is where the Agricultural Dwelling House Advisory Committee comes in in England and Wales. If a stockman were to retire or die and if it were vital for a new worker to move into his house, the committee could examine the case quickly and, if necessary, issue a certificate requiring the local authority to rehouse the worker or the widow as a priority case. What the committee will not do is to arrange for anyone to be rehoused just because the farmer wants to let the house as a holiday house, because that is not a genuine agricultural need.
Four years' experience show that this reformed system is working well in England and Wales. The machinery is relatively informal. It has taken the whole issue out of the courts and done away with the threat of arbitrary eviction. Not surprisingly, farm workers in England and Wales have welcomed the reform because, among other things, it has rescued them from an arrangement with its roots in the feudal system.
Perhaps more significantly, there is evidence that farmers now see merit in the new procedure from their point of view. The fact that housing authorities now take into account agricultural needs along with other industrial needs should make for better housing management in rural areas.
The 1976 Act does not apply to Scotland. Scottish farm workers can still face eviction if farmers want to repossess their cottages for a wide range of reasons.
I do not want to overstate my case, because actual evictions may be relatively uncommon. There is an informal arrangement between the Transport and General Workers' Union and the National Farmers Union of Scotland and some housing authorities, which works well as far as it goes. It stands to reason that evictions are rare, because farm workers are only too well aware that they face this risk. Nobody in his right mind waits until he is thrown out on the streets with his family and furniture.
I have been unable to find statistics for legal proceedings against tied cottage occupiers in Scotland, because the Scottish Office apparently does not keep the figures. We know that there are 15,000 tied cottages on Scottish farms and that during 1974 the Tavistock Institute study showed that there were about 200 cases of threatened or actual evictions.
It might be interesting if we could look at the question from another point of view. During my brief career as a farmer I was once compelled to go through the motions of obtaining a court order to accommodate a new employee. There was never any intention to evict the widow concerned, but under the present system in Scotland that is the only way in which to get the local authority to give the likes of that widow priority consideration so that an essential incoming worker can be housed. How much more civilised it would be if people such as that widow could stay in their own home and the new worker could have a council house in a nearby village.
The tied housing system in Scotland is degrading for all concerned. It is not necessary in many cases, and it means that 15,000 workers are still living under unjustifiable threat, regardless of how seldom that threat may be carried out. Both sides of the farming industry in Scotland have expressed concern about the increasing housing difficulties caused by the Government's building cuts and their policy of selling council houses Mr. Henry Crawford, secretary of the Scottish farm workers section of the TGWU, who has in the past opposed reform of tied housing, has now changed his position, in view of the pressure on the rural housing stock in Scotland. He has told me and a number of my hon. Friends and Shelter that he now supports reform, and he has specifically endorsed the Bill.
The NFU of Scotland, on the other hand, is predictably hostile, just as the English NFU was before it saw the light. The NFU of Scotland yesterday issued an extraordinary press release opposing my Bill and claiming that the TGWU also opposed it. The NFU of Scotland has no right to make any such assertion on behalf of the TGWU. It is plainly not true, as was confirmed by the TGWU this morning. The NFU has over-reacted to my modest and constructive approach to the problem and is seeking to confuse the issue in a mischievous manner. In its press release it refers to
isolated and unfortunate examples of eviction which could be satisfactorily resolved by the Unions".
I do not know how it can say that the evictions are isolated, because the Scottish Office does not know how many there are. As for the unions resolving these matters, fewer than half the 15,000 tied cottage occupiers in Scotland are trade union members.
To add insult to injury, the NFU put into Mr. Crawford's mouth a comment to the effect that I was lying


when I cited his endorsement of the Bill. It quoted Mr. Crawford as saying that the Bill would only stir up an emotional response. The emotion already exists. To name only three cases in my constituency last month. Dick Patterson, Charles McCue and George Glass and their families, all with 20 years' service on farms, experienced the initiation of eviction proceedings. I have with me one of the eviction notices, which is a cold and cruelly worded legal document. The sheriff ordered Mr. Glass to pay the costs of his own eviction.
It is not surprising that this is an emotional matter, because people's security in their own homes is at stake.
I am sorry that the Scottish NFU has chosen to react to a constructive initiative on a genuine problem in such a paranoid manner, but my undertaking to consult it as well as Shelter on the detailed proposals still stands. We have already passed legislation to overcome the problems of agricultural tied housing in England and Wales. Now I ask the House to give me leave to introduce my Bill so that we may give further constructive consideration to the problems in Scotland.

Mr. David Myles: rose—

Mr. Speaker: I understand that the hon. Gentleman wishes to oppose the Bill.

Mr. Myles: Yes, Sir.
The hon. Member for Berwick and East Lothian (Mr. Home Robertson) thought that he had anticipated what I would say when he said that I would describe his Bill as revolutionary. I most certainly would not; I would rather describe it as a damp squib, because it will peter out.
I speak on the subject with a fair amount of feeling, for I live in an agricultural tied house as a tenant farmer. As a tenant farmer, I welcome the Government's move—a constructive move, unlike that of the hon. Gentleman—on capital transfer tax on farm tenancy value, in this year's Finance Bill. That will help to keep farmers in their tenanted farms, which is a marvellous thing.
If I had been on the hon. Gentleman's estate I would have been evicted, because he has evicted all the tenants that were there previously—or, at least, he has been able to get rid of them by some other means. I would also have had to leave my house. It would not be covered by the hon. Gentleman's Bill, which highlights his biased approach, ignoring reality and practicality. The fact of life is that if the hon. Gentleman were to sell his farm he would be expected to vacate his house, unless it was a mansion house, and that would be unsuitable for a simple farmer to live in.
Because of the nature of farming in Scotland, it is generally vital that the worker—or, as he was wont to be called, the cotter—should live in a cotter house. There is nothing demeaning about being a cotter, as Burns pointed out in "The Cotter's Saturday Night". The worker is then on hand for stock tending and is available to take advantage of weather conditions so that work can be undertaken timeously.
Much more stock farming is done in Scotland than in England. That is why tied houses are so important. Houses on Scottish farms have been greatly improved over the years. A top-class agricultural worker can now pick and choose about the house that he wishes to live in. In

addition, if he wants to move he can always be assured that a good house will be available to him with no travel-to-work expenses.
The main reason for refusing the hon. Gentleman leave to bring in the Bill is that it is not wanted. The hon. Gentleman made great play about Henry Crawford, of the Scottish branch of the Transport and General Workers' Union. His press release—

Mr. Home Robertson: It is not his press release, but the NFU's.

Mr. Myles: The press release that cites Henry Crawford as supporting the Bill is dated 8 July. The NFU press release—which is a joint press release by the NFU of Scotland and the Scottish farm workers' section of the TGWU—is dated 10 July. Henry Crawford must have had a change of mind or must have decided, on reflection, that he was being conned.
That press release states:
'We are extremely disappointed that Mr. John Home Robertson, MP intends to seek leave to introduce a Bill to alter the law on agricultural housing in Scotland…Mr. Robertson's Bill would achieve little or nothing except publicity'.
I am sorry to have to tell the hon. Gentleman that the publicity will be bad. The press release continues:
In a separate comment, Mr. Crawford referred to Mr. Robertson's recent Press Release which suggested that Mr. Crawford endorsed the Bill's aims. 'My aim is to secure the best arrangements possible for my members and for agriculture as a whole, and I know that Mr. Robertson's aim is the same'.
He is being kind to the hon. Gentleman.
'The point is that I believe Mr. Robertson's approach will stir up an emotional response rather than secure any real improvement in the situation'.
Therefore, I urge the House to refuse the hon. Gentleman the privilege of walking up to the Chair, of presenting the Bill and of doing any further mischief.

Mr Speaker: The Question is, That the hon. Gentleman have leave to bring in his Bill. As many as are of that opinion say "Aye".

Hon. Members: Aye.

Mr. Speaker: To the contrary "No". To the contrary "No"? The Ayes have it.

Question agreed to.

Bill ordered to be brought in by Mr. John Home Robertson, Mr. Gavin Strang, Mr. Norman Buchan, Mr. Hugh D. Brown, Mr. Donald Dewar, Mr. Martin J. O'Neill, Mr. Dennis Canavan, Mr. George Foulkes, Mr. Robert Hughes and Mr. William McKelvey.

AGRICULTURAL TIED HOUSING REFORM (SCOTLAND)

Mr. John Home Robertson accordingly presented a Bill to bring. in a Bill to improve the security of tenure of farmworkers and others who occupy agricultural tied houses in Scotland; and for connected purposes: And the same was read the First time; and ordered to be read a Second time upon Friday 24 July and to be printed [Bill 186].

Mr. Hugh D. Brown: On a point of order, Mr. Speaker. For the benefit of those of us who were in the Lobby, will you give some guidance on the question why the Division did not take place? If it was for the normal reason, will you make it clear that that is an abuse of the House?

Mr. Speaker: I do not think that there was an abuse of the House. The Tellers were not experienced and there


was no hon. Member in the Chamber to shout "No". I put the Question twice, but I received only "Ayes". What happened could happen to any hon. Member who is not accustomed to being a Teller.

Mr. Donald Dewar: On a point of order, Mr. Speaker. During a speech which we had understood was an intimation of opposition to the Bill, the hon. Member for Banff (Mr. Myles) made certain remarks about my hon. Friend the Member for Berwick and East Lothian (Mr. Home Robertson). As an uninvolved outsider, I took those remarks to contain the clear implication that my hon. Friend had been evicting people from his land and was therefore guilty of a remarkable level of hypocrisy. Is it possible, Mr. Speaker, to ask you to have that insinuation substantiated or to request the hon. Gentleman to withdraw his remarks.

Mr. Speaker: That is not my business. If the hon. Member for Banff (Mr. Myles) made such a statement, it went unchallenged.

Mr. Myles: Further to the point of order raised by the hon. Member for Glasgow, Provan (Mr. Brown), Mr. Speaker. It is well known that I am very deaf. I was behind the Chair and did not hear you. Therefore, I could not use my loud voice to shout "No". It was entirely my fault that I missed the Question being put. In no way were you, Mr. Speaker, to blame.
Further to the point of order raised by the hon. Member for Glasgow, Garscadden (Mr. Dewar), I have spoken to the hon. Member for Berwick and East Lothian (Mr. Home Robertson) about my saying that he evicted people. I understand that when the hon. Gentleman took over his farm on the border there were tenant farmers on the land. Gradually they have moved out and he has taken over the land himself. If I was misled, I withdraw that allegation.

His Royal Highness the Prince of Wales and the Lady Diana Spencer

The Prime Minister (Mrs. Margaret Thatcher): rose—

Mr. Dennis Skinner: On a point of order, Mr. Speaker. Would you consider accepting a manuscript amendment to the motion that the Prime Minister is about to move, along the lines that we call upon the Government to change their economic policies in order to fulfil the future happiness of approximately 1 million young people under the age of 25 who have been unable to find a job as a result of those policies? The Government should provide full and useful employment for all. Will you accept that as an amendment to the motion?

Mr. Speaker: No, I will not accept that manuscript amendment.

The Prime Minister: I beg to move,
That an humble Address be presented to Her Majesty congratulating her Majesty and His Royal Highness The Duke of Edinburgh on the approaching Marriage of His Royal Highness The Prince of Wales to the Lady Diana Spencer; expressing to Her Majesty the great pleasure felt by this House and the Nation at this joyful event; and praying that His Royal Highness The Prince of Wales and the Lady Diana Spencer will be blessed with every happiness in their married life.
It is 118 years since we celebrated the marriage of a Prince of Wales as heir to the throne. Some 34 years ago you, Mr. Speaker, were present in this Chamber when the then Prime Minister moved an humble address to their Majesties King George VI and Queen Elizabeth on the occasion of the marriage of their daughter, the heir to the throne, then Her Royal Highness the Princess Elizabeth, to Lieutenant Philip Mountbatten.
On that occasion Mr. Attlee spoke of the promise which the people had watched unfolding through Her Majesty's childhood, and his confidence that the high regard and popularity which the Royal Family had so justly earned would be fully maintained.
Today we can reflect how well his confidence was justified. The nation's admiration and affection for the Royal Family has been demonstrated in the celebrations of both the Silver Jubilee and the 80th birthday of Her Majesty Queen Elizabeth, the Queen Mother. I stress "admiration" and "affection"—both were to be seen not only in the formal celebrations but in the spontaneous outpourings of public acclaim and happiness throughout the country and the Commonwealth during those celebrations.
Now we approach another great occasion which has, once again, captured the imagination of Her Majesty's people. Over the last 30 years, the country, the Commonwealth and the world have watched with continuing interest and with ever-increasing enthusiasm and respect as His Royal Highness the Prince of Wales has taken on the responsibilities of his important role. We have admired his dedication to his duties as much as his affinity with the people. Mr. Attlee's sentiments of 34 years ago about Princess Elizabeth, His Royal Highness's mother, have been shared by the nation about her son. Now His Royal Highness has chosen a bride whose beauty, spontaneity and dignity have already won the hearts of the British people.
I am sure that the whole House shares the Prince of Wales's obvious happiness and joy in the bride that he has chosen. We look forward to a future in which they will play an increasingly prominent part in the life of our country. We are confident that they will inspire the same loyalty, respect and gratitude as Her Majesty and Prince Philip have won throughout her reign.
We offer The Queen and the Duke of Edinburgh our sincere and heartfelt congratulations and wish the Prince of Wales and Lady Diana long life and every happiness.

Mr. Michael Foot: I rise to second the motion moved by the Prime Minister, in the knowledge that on some occasions there have been controversies in the House on the occasions of Royal marriages or legislation affecting royal marriages. That was so in 1772, when the Royal Marriage Act was passed. It was introduced in another place because the Government of that day thought that it might be more convenient for the legislative processes to do it that way. [Interruption.] I see that the habit is not altogether removed from the knowledge of the Patronage Secretary.
On that occasion, too, the monarch, George III, wrote a letter to the Patronage Secretary of the day saying that he hoped that the Bill would have a speedy passage and that the names of all defaulters would be carefully noted. That was how it was done in those days. When the Bill arrived in the House of Commons it was opposed by the greatest practitioner of parliamentary opposition in the history of this institution—Charles James Fox. He had a special interest that he did not declare, in that he had a tincture of Royal blood in his veins and he thought that that was perhaps the reason why the Bill was not framed in the best possible manner. He thought that monarchs, men and women, should be able to marry whoever they chose—if the other partner was agreeable to the proposition, of course—and he thought that that was the principle which should govern such matters. I heartily agree with Charles James Fox on that subject, as on many others.
The Bill eventually became an Act and by measures that the Patronage Secretary knows so well. It was said by a journalist at the time.
Never was an Act passed against which so much, and for which so little, was said.
Knowing what has happened in recent times, that is a great condemnation. The Bill was passed in extraordinary circumstances. However, I say to those who may not be sufficiently acquainted with such historical matters that that measure—which was the offspring of a royal whim and male chauvinism, which was derided so powerfully in the House and which obviously had so many deficiencies—remains on the statute book with scarcely a comma altered. That should be a lesson to my hon. Friends to be more vigilant when such matters are presented to the House.
That is the Act under which these discussions are taking place. I am glad that on this occasion the controversies are calmer than they were in those far off times. I join the Prime Minister in the good wishes that she has offered to Prince Charles and Lady Diana. I wish them all happiness.

From all that we have seen, Prince Charles has performed his royal duties with great charm, persistence and—if I can say without any possibility of misunderstanding—with unfailing equestrian poise. He has done it most skilfully and he stays on much longer than most of us would. I wash him every success in that and in everything else.
I have no qualification in the good wishes that the House offers the happy couple. If any of my right hon. and hon. Friends below the Gangway wish to celebrate this year by introducing a private measure for the repeal of the Royal Marriages Act 1772, I shall be happy to append my name to the document.

Mr. David Steel: This is one of those rare but happy occasions when all parties can unite with enthusiasm at the proposition be fore the House. On this occasion the leaders of the Social Democratic Party, the Ulster Unionist Party and the Scottish National Party have asked me to associate them also with support for the humble address. On behalf of them and my colleagues, I join in sending our good wishes to Her Majesty and to the happy couple on this family and national occasion.
There have been a few grumbling souls outside and no doubt inside the House who say that at a time of national austerity we should play down the coming wedding. I do not believe that that accords with the view of the vast majority, who look forward to a day of shared rejoicing on 29 July.
It is right that at this time we should also record our thanks to the Prince of Wales for his example in public service. I have watched with admiration his sponsoring of the International Year of Disabled People, his heading of the United World colleges, his promotion of the arts, his organisation of the Jubilee Trust and his representation of this country on international occasions such as the independence celebrations in Zimbabwe last year.
To these undoubted talents and skills he now adds a further attribute—the ability to choose an exceptionally attractive wife. Those who have had the chance to meet Lady Diana Spencer can testify not only to her obvious outward grace but to her delightful unstuffy vivacity, which makes her a valuable addition to the Royal Household.
In the years to come the nation will demand of these two people years of sustained public service. Let us hope that in the immediate future they will be afforded not only the blessing of happiness in their married life, referred to in the motion, but reasonable times of privacy to enjoy their family life.

Question put and agreed to, nemine contradicente.

Resolved,
That an humble Address be presented to Her Majesty congratulating Her Majesty and His Royal Highness The Duke of Edinburgh on the approaching Marriage of His Royal Highness The Price of Wales to the Lady Diana Spencer; expressing to Her Majesty the great pleasure felt by this House and the Nation at this joyful event; and praying that His Royal Highness The Prince of Wales and the Lady Diana Spencer will be blessed with every happiness in their married life.

Orders of the Day — Finance Bill

As amended (in the Committee and in the Standing Committee), considered.

Ordered,
That the Finance Bill, as amended, be considered in the following order—

(a) new Clauses;
(b) Amendments relating to Clause 1, Schedules 1 and 2, Clauses 2 to 7, Schedule 3, Clause 8, Schedule 4, Clause 9, Schedule 5, Clause 10, Schedules 6 and 7, Clause 11, Schedule 8, Clauses 12 to 35, Schedules 9 and 10, Clauses 36 to 63, Schedule 11, Clauses 64 to 89, Schedule 12, Clauses 90 to 93, Schedule 13, Clauses 94 to 122, Schedule 14, Clauses 123 to 128, Schedule 15, Clauses 129 and 130, Schedule 16, Clauses 131 to 133;
(c) new Schedules;
(d) Amendments relating to Schedule 17 .—[Mr. Lawson.)

New Clause 8

INDEX-LINKED LOAN CAPITAL

'In section 126 of the Finance Act 1976 (exemption from stamp duty for transfers of loan capital) at the end of subsection (3) (which provides that the exemption shall not apply to loan capital carrying a right to interest exceeding a reasonable commercial return or a right on repayment to an amount not reasonably comparable with what is generally repayable) there shall be inserted "but subsection (1) above shall not be prevented from applying to any loan capital by virtue of paragraph (a)(i) or (b) above by reason only that it carries a right to interest or, as the case may be, an an amount payable on repayment determined to any extent by reference to an index showing changes in the general level of prices payable in the United Kingdom over a period substantially corresponding to the period between the issue or raising of the loan capital and its repayment." .—[Mr. Lawson.]

Brought up, and read the First time.

The Financial Secretary to the Treasury (Mr. Nigel Lawson): I beg to move, That the clause be read a Second time.
This new clause is straightforward. The Labour Government in 1976, in the Finance Act of that year, made fixed interest loan stock by companies free of stamp duty. For understandable reasons, that exemption from stamp duty did not extend to index-linked industrial loan stock. In view of the fact that the present Government have introduced index-linked gilt-edged securities, we felt it right that the exemption that the Labour Government introduced for fixed interest loan stock should be extended to index-linked loan stock. Indeed, this is in accordance with the recommendation of the Wilson committee, as the House will be aware, which stated that
in order to encourage experimentation, the present impediments, which make it difficult for companies to issue indexed securities, should be removed.
Stamp duty could be one such impediment. It is perhaps appropriate to mention that the introduction of index-linked gilt-edged securities by the Government has enabled an important additional degree of flexibility to be added to the Government funding operations. Indeed, the two issues have been very successful so far. Intitially there was a certain amount of somewhat ill-informed comment—it is dying down now—on the market's reaction to the second issue of indexed gilts last week. We

were told originally, when the issue was under-subscribed, that we had mistimed the issue because the institutions had no money. That was rapidly proved to be false when the whole of the rest of the stock was snapped up from the issue department of the Bank the following morning.
It was also argued, with the wisdom of hindsight, that the yield of 2·8 per cent. in real terms at which the issue was made was too high. Of course, when stocks are auctioned it is impossible to say in advance what the yield will be. That is in the nature of auctions. But if we compare the 2·8 per cent. in real terms with the alternative, which would have been about 15½ per cent. nominal—which is what long-dated conventional gilt-edged securities were yielding at the time—the 15½ per cent. nominal can be considered to be a lower yield only on a singularly defeatist view of inflation, and one that the Government most certainly do not share.

Mr. Robert Sheldon: In view of the success that the right hon. Gentleman sees as a result of the issue, will he say when he will be issuing the next?

Mr. Lawson: The right hon. Gentleman ought to know that gilt-edged tactics and funding proposals are not signalled well in advance. We issued the first £1 billion of index-linked gilts in March and the second £1 billion only last week. No doubt there will be other issues, because these two have been successful. It is remarkable that last week the Government were able to sell £1 billion of long-term debt at a real yield of under 3 per cent. in what were particularly adverse market conditions, both domestically and world-wide, with interest rates and short rates in particular, rising both here and abroad, and the pound weakening at the time.
That demonstrates that the new instrument enables us to maintain the momentum of the funding programme—which is a vital component of our monetary strategy—at a time of considerable market uncertainty. It is further evidence of the advantages of the increased flexibility in funding operations that we have recently introduced. It means that it is possible to avoid funding pauses without resort to such tactics as "the grand old Duke of York".
We felt that it was appropriate that the stamp duty exemption, which applies not only to all gilt-edged securities but to fixed interest industrial loan stocks, should be extended to index-linked industrial loan stocks that any companies in the future might see fit to introduce. I therefore commend the new clause to the House.

Mr. Richard Wainwright: I welcome the fact that the exemption from stamp duty is to be given in respect of stock that is available to any purchaser. That marks it off sharply from the extraordinary and perverse limitations that are imposed on the Government's gilt-edged index-linked stock, which hitherto has been available only to a very limited and privileged class of purchaser.
I tabled a question to the Financial Secretary on Monday, asking whether, in the light of the Government's unsuccessful operation last week, they would now see the sense of making their index-linked gilts available to ordinary British citizens. I am somewhat encouraged not to receive a flat, negative in answer to that question, although I still await the answer.
Only a moment ago, in proposing the new clause, the Financial Secretary talked about his auction of index-linked Government stock. To me, and I imagine to other hon. Members on both sides of the House, it is a very peculiar auction—not to say a rigged auction—where one can get admission as a bidder only if one shows a highly privileged ticket as an institutional subscriber. That is not my definition of an auction. An honest auction should be open to all genuine bidders, great and small, whether they come from privileged institutions or whether they bring their own savings in an old stocking.
In so far as the new clause does not share what I and my hon. Friends believe to be a severe defect of the present gilt-edged index-linked stock, I am happy to welcome it.

Mr. Robert Sheldon: The hon. Member for Colne Valley (Mr. Wainwright) pursued the case of the successful auction. I should have thought that a successful auction is not one at which the reserve price fails to be met, and something has to be bought in and sold subsequently. Therefore, I would not take the view that this has been quite as successful as has been made out.
We have no quarrel with this form of providing the kind of instruments that pension funds rightly require, and we look at developments as they come. We shall await further developments with interest.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 27

NOMINEES AND APPROVED INVESTMENT FUNDS

'(1) Subject to the provisions of this section, shares subscribed for, issued to, held by or disposed of for an individual by a nominee shall be treated for the purposes of this Chapter as subscribed for, issued to, held by or disposed of by that individual.

(2) Section 51(1) above shall not apply where the amount is subscribed as nominee for an individual by the person or persons having the management of an investment fund approved for the purposes of this section by the Board ("the managers of an approved fund").

(3) Any shares issued to the managers of an approved fund as nominee for an individual shall he treated for the purposes of section 51(4) above as shares in respect of which relief has been claimed (whether or not claimed in fact).

(4) The managers of an approved fund may be treated for the purposes of section 51(5) and (6) above as the claimant in respect of shares issued to them as nominee for an individual.

(5) Section 61(1) above shall apply to the managers of an approved fund as it would apply to an individual if relief had been given to him in respect of the shares held for him as nominee by the managers (whether or not given in fact). '.—[Mr. Peter Rees.]

Brought up, and read the First time.

The Minister of State, Treasury (Mr. Peter Rees): I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker (Mr. Bryant Godman Irvine): With this it will be convenient to discuss Government amendment No. 79, and amendment No. 81, in clause 51, page 40, line 9, at end insert
'Provided that where two or more individuals acting as a syndicate or through a broker or other intermediary subscribe for shares in two or more companies, the foregoing requirement of this subsection shall be deemed to be satisfied if the total amount subscribed by each individual is £1,000 or more and the total subscribed by them collectively for the shares of each company is also £1,000 or more, but so that the Board may make regulations under this section prescribing conditions subject to which this proviso shall operate'.

Mr. Rees: Amendment No. 79 is a paving amendment for the new clause.
During the debates in Standing Committee there was a keen debate on clause 51 and particularly on the lower limit of £1,000 which was set for any investment by an individual taxpayer. I explained to the Committee that it was purely administrative reasons that had led the Government to set that lower limit. Cogent arguments were deployed on both sides of the Committee. I particularly recall that of my hon. Friend the Member for Croydon, South (Sir W. Clark), the Opposition arguments and those of the Liberal Party. I cannot recall whether the Social Democratic Party contributed to that debate, but no doubt it did. I was persuaded by the merits of those arguments. I felt that the administrative convenience of the Inland Revenue—that is something that we should take into account—should take second place on this occassion to the advantage of enabling smaller investments to be made in business start-ups and to enjoy tax relief.
As a result, we have produced the new clause. In due course we shall reach Government amendment No. 80, which will reduce the lower limit from £1,000 to £500, which was the limit pressed on us in Standing Committee.
The new clause is, however, of a rather more specialised nature. It will abolish the lower limit where a taxpayer invests in a business start-up through an investment fund with a separate manager and trustee. It will enable such funds to be set up and to be professionally managed. They will be enabled to invest for the individual members of such a fund in a much wider range of start-ups.
I should emphasise, however, that, apart from the lower limit rule, the other rules which must be met by the individual taxpayer if he is to qualify for relief will still have to be met by him even though he invests through a fund. There are, however, two administrative provisions which will enable matters relating to the apportionment of reliefs to be determined between the Inland Revenue and the manager of the fund.
It will obviously be for the convenience not only of the Revenue but for the manager of the fund and the individual investor that those overall matters should be determined broadly without reference to the individual taxpayer, which I am sure will be for his convenience.
I believe that this will be a very useful enlargement of the range of provisions designed to encourage business start-ups. It will enable individual taxpayers to participate through professionally managed funds. I hope, therefore, that it will channel an increased flow of capital into business start-ups and generate increased business activity and, ultimately, new jobs.
On that basis, I commend the new clause and Government amendment No. 79.

Mr. Robert Sheldon: We look at the new clause with interest because, although we fully accept and welcome the hon. and learned Gentleman's revised view of what the lower limit for investment ought to be—from £1,000 to £500—which follows precisely the Opposition's amendment in Committee, we are a little anxious about some of the other aspects of it.
First, we welcome the business start-up scheme in so far as it will give money to new businesses. We believe that it has been heavily oversold by the Government. By comparison with recent bankruptcies that have arisen directly from the Government's policies, the damage being done to small businesses far outweighs anything that


the Government can do to redeem the wrongs by such methods as this scheme. But, in so far as they assist small firms to get started with fresh funds, we welcome such schemes.
4.45 pm
The hon. and learned Gentleman has not dealt with the question of cost to the Revenue. I should think that that cost would be fairly sizeable, given the enthusiastic welcome that has been given to the new clause. We shall be starting a number of investment funds. The new clause will deal with "approved" funds. I should like to question the basis of the approval. How will these funds be approved? Who will vet and supervise them? Who will be responsible for this area?
We are dealing with a number of individual taxpayers who could be persuaded to part with considerable sums—considering that these new investment funds are a new form of popular savings. A number of schemes have been established in various parts of the country to make use of some people's redundancy money. A number of fraudulent cases have arisen, which can only cause dismay and regret to those who see such redundancies leading to the loss even of the redundancy pay of those concerned. This could become a very useful way for a number of less reputable firms and people banding together to obtain that kind of money. We shall need to have a number of provisions made to handle this part of this new problem. What is the Minister doing in that respect?
The original purpose was likely to be limited, as was set out by the original cost. How far has this cost increased as a result of the new clause, and what cost is attributable to the investment fund? I should have thought that if it is to warrant the new clause, it is likely to be very considerable. I know that this will be subject to large margins of error. Nevertheless, the Treasury must make this kind of estimate to be able to assess its importance and the cost to the Exchequer.

Sir William Clark: My hon. and learned Friend the Minister will recollect that we had a long debate on these matters in Standing Committee. I subsequently withdrew the amendment that I moved, on the assurance that my hon. and learned Friend would introduce something on Report. I am delighted, and I welcome the new clause.
The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) said that the start-up scheme had been oversold. I do not think that the scheme has been sold sufficiently. Here we have an opportunity. I remind the House that this sort of tax concession is unique in the Western world. If we are to get business-moving again and to get our savers a little more business oriented, it is this sort of scheme which will spark off that additional investment.
I welcome the limit of £10,000, as the House does. But that is all very well for someone who has a lot of money to invest. If people have that sort of money, obviously they have at their fingertips the expertise, from accountants, advisers and so on, to see whether or not a small business is worth investing in. Those who receive redundancy money are in no position to decide upon the merits of the small business in which they may wish to invest. I am delighted that the Government have reduced the limit of investment from £1,000 to £500. My hon. and learned

Friend will no doubt confirm my assumption that the minimum investment in the investment fund will be the £500 as mentioned in amendment No. 80.
Like the man with £10,000 who can obtain all the expertise he needs, even the small man should have the opportunity to invest in industry. I suggested in Committee that there should be some syndication whereby investors could band together and obtain a manager with the expertise to go into whatever business might be suitable. New clause 27 covers all the points that I tried to make.
I wish to discuss administration as it affects the Inland Revenue. If a small investor puts £500 directly into a small business it will put a tremendous burden on the Inland Revenue. At the end of the assessment year for that taxpayer an adjustment has to be made. There has to be an investigation to see whether it is a proper business. If, however, the money is channelled through an investment fund, as suggested in the new clause, the fund managers could easily give a certificate saying that the money invested had been reinvested in the businesses covered by the clauses dealing with the start-up scheme. I do not believe that the right hon. Member for Ashton-under-Lyne need have any qualms or worries about the investment funds. It is easy to introduce regulations to control the activities of the investment funds. They work well in relation to unit trusts. There need not be too much concern about fraudulent practice. I am sure that the Government will make certain that the investment funds are strictly controlled and regulated.
The administrative saving to the Inland Revenue will be a bonus. My hon. Friends and I are grateful to the Government for taking the advice given by Conservative Back Benchers in Committee.

Mr. D. N. Campbell-Savours: I should like to add my support and approval for the changes made by the Government. I supported the principle of the business start-up scheme in Committee. We have now a fairly major additional concession which enhances the scheme in a major way. I should like to feel that if it appeared over the next few months that people were abusing the concession the Minister would come forward to make the necessary changes and would not wish to hide what had happened until next year's Budget Statement.
In such a novel scheme there must be dangers that have not been anticipated by the Treasury and the Government. We do not know what they are. However, in every society, there are those who wish to exploit the law whatever form it may take, particularly law approved in the best spirit of Parliament. I hope that the Minister will watch closely the progress of this major concession and that if at any stage there is cause for anxiety, he will return to the House to make the necessary changes so that the concession is not discredited.
I should like to think that this time next year, even if parts of the Budget Statement have been discredited, this part will not be one of them and that hon. Members will be proved correct in regarding this scheme as being of considerable importance to the business community.

Mr. Richard Page: I add my welcome to this imaginative addition to an already imaginative and unique scheme. I wish it well. I believe that it will be a tremendous boost to the starting of new and innovative businesses. As my hon. and learned Friend the Minister said, it will immediately allow a spread of risk


for the small investor, permitting him to participate. It is an ingenious means of getting round the £500 bottom limit.
Perhaps more important, I see the new clause bringing about the creation of what is, in effect, a marriage bureau where investors and entrepreneurs can come together, one with the money and one with the ideas, to get the scheme off the ground and to get local joint ventures launched. This will be vital for the success of the start-up scheme. I recall saying on Second Reading that I hoped that the start-up scheme would bring about local investment in local firms. I believe that the new clause will focus people's minds on supporting local firms and turn them away from the existing remote forms of investment. It is only through the support of local firms and the small business sector that we shall strengthen the base of the country's economy.

Mr. Peter Rees: I am delighted that there should be such a unanimous welcome for these provisions, and, especially, the one that we are discussing. The only qualification that I could detect came from the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), who clearly has to make a general political point. I take it that he approves of the provisions.
I was glad to hear the unqualified welcome of the hon. Member for Workington (Mr. Campbell-Savours) for these provisions. The Government will, of course, be monitoring closely the general provisions as well as these ones. We are concerned that the scheme should not be discredited by abuse. I am grateful to my hon. Friends the Members for Croydon, South (Sir W. Clark) and Hertfordshire, South-West (Mr. Page), who played a notable part in our debates in Committee. We like to think that the proposal will make an imaginative contribution to the general business scene. It will bring a flow of capital into the small business sector, generate activity and generate jobs.
The Government would be extremely concerned if what I may describe, without immodesty, as a well-conceived scheme were discredited by abuse. We shall be prompt to remedy any abuse that comes to our attention. I can give the hon. Member for Workington that assurance.
The right hon. Member for Ashton-under-Lyne referred to the basis for approval. I hope that it will be possible, in due course, as experience is gained, to publish guidelines. It may be for the convenience of the House and those who study our debates if I indicate the kind of factors that the Board of Inland Revenue will take into account. It will look to ensure that there is a bona fide management function to be performed by the manager and trustees. It will have regard to the expected number of investors. There would obviously be a certain caution in the Revenue's approach if it were found that there were only three investors. There might be a suggestion that the fund was not used for the primary purpose of the legislation.
The board will be concerned with the minimum amount required by the fund to be put up by each investor. It will perhaps be concerned with the spread of investments expected among qualifying companies. We imagine that the take-up in bona fide cases will be a wide spread of investments in a wide range of businesses. This will spread the risk of the individual investor and give him the greatest possible commercial assurance. I have to emphasise that the Board of Inland Revenue cannot guarantee the commercial viability of these particular investments. I am

sure that the right hon. Member for Ashton-under-Lyne, with his considerable experience, would not expect it to do so.
The board will be concerned to see that each individual's investment is spread pro rata over the companies to be invested in, and that the fund does not—at any rate, knowingly—invest in companies with which individual investors are connected. I must emphasise that the basic conditions of the scheme that have to be satisfied if an individual taxpayer or investor is to obtain relief will apply as surely in an investment through one of these investment funds as it will to an investment by a taxpayer on his own.
The Inland Revenue will be concerned to see that the fund has no other business, that the managers are reputable and capable of handling the necessary administrative arrangements, that they should exercise voting rights on behalf of investors in relation to the individual companies invested in and, finally, that the individual investor should not be able to disinvest in one of the underlying investments rather than in another. If an investor wishes to withdraw, we would prefer that he does so entirely and does not discriminate between the underlying investments.. The essence of the scheme is that the fund itself should be well administered and that there should be ease of administration for the Inland Revenue. It should be treated somewhat as a unit trust or an investment trust. Those are the factores that will weigh with the Board of Inland Revenue, and I hope that the underlying good sense of the proposal will appeal to the House.
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The right hon. Gentleman asked whether I had a new figure for the tax cost of the business start-up scheme in the light of this new development. As I said in Committee, the figure of £50 million of tax cost is highly speculative. Obviously, we cannot say precisely what the take-up will be. We hope, as a result of the various amendments and new clauses that were tabled in Committee and which we are presenting for the House's approval on Report, that there will be a considerably increased take-up. The greater the take-up—and, of course, the greater the tax cost—the better pleased we shall be, because it will demonstrate that this is a worthwhile scheme, which it is generating additional business activity and, ultimately, additional jobs. On that basis, I hope that the House will welcome the new clause and the Government amendment.

Sir William Clark: Will my hon. and learned Friend answer a question about the investment fund? Is the £500 a minimum subscription?

Mr. Rees: No. There is no minimum subscription for each individual investor in each individual company. The spread of investments may be such, for example, that pro rata his share is £200. That will not disqualify the fund. The Revenue will be concerned overall to discover what will be the minimum or the maximum stake of an investor in the fund as a whole and what the managers' proposals will be for individual investments in the underlying companies.

Sir William Clark: I understand that, but an individual who invests directly in the business must invest £500 if amendment No. 80 is made. Will the minimum investment into the investment fund by an investor be £500? It would be unfair to make an investor put £500 directly into a business. He should also put £500 into the investment fund.

Mr. Rees: Of course, the £500 limit will apply, but below that I suspect that, as a matter of commercial reality, few managers would be prepared to set up a fund in which the individual investment was as small as £500. My hon. Friend is right to say that the £500 minimum limit would apply to an individual investor's investment.

Mr. Robert Sheldon: Is the hon. and learned Gentleman saying that the minimum that the fund is allowed to take from any investor is £500?

Mr. Rees: Yes.

Mr. Sheldon: This is a good first draft, and I look forward to seeing the guidelines. However I want to ask the hon. and learned Gentleman about the expected number of investors. When one is attracting funds from the general public one needs to guard carefully against fraud. The problem with new forms of investment is that new forms of fraud can be introduced. I hope that the hon. and learned Gentleman fully realises the importance of what is being done here.
The hon. and learned Gentleman said that he cannot look to the commercial viability of the fund. I understand the problems that are involved. He says that the managers will have to be reputable. However, bearing in mind the limited size of the fund, he may find himself with a fair number of managers, each of whom will have to be assessed. I hope that he will regard his role here as an important one, because once he has given his imprimatur to the new fund the responsibility will lie heavily on his shoulders. He must be aware that a number of these funds will make use of the fact that they are approved to attract funds from the general public.
We are dealing with wholly new form of savings, and the failure of any such investment fund could cause disillusion and distress. I hope, therefore, that the hon. and learned Gentleman has taken into account these problems, because he did not seem to have done so. That may give added force to his kind suggestion to publish the guidelines. I hope that he will publish them at the earliest opportunity.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 28

EXEMPTION FOR INTEREST ON DAMAGES FOR PERSONAL INJURIES

'(1) In section 375A of the Taxes Act (exemption for interest included in judgment or interlocutor awarding damages for personal injuries) after subsection (1) there shall be inserted—
(1A) A payment in satisfaction of a cause of action, including a payment into court, shall not be regarded as income for any income tax purpose to the extent to which it is in respect of interest which would fall within subsection (1) above if included in a sum for which a judgment is given or if decree for payment' of it were included in an interlocutor.

(2) This section has effect in relation to any payment made on or after 6th April 1981.'—[Mr. Brittan.]

Brought up, and read the First time.

The Chief Secretary to the Treasury (Mr. Leon Brittan): I beg to move, That the clause be read a Second time.
This new clause extends the exemption from income tax provided by section 375A of the Income and Corporation Taxes Act 1970 for interest on damages for personal injuries for which judgment is given to include

the interest element included in the payment into court, but for which, in the event, judgment is never given. The interest element in an out-of-court settlement is made between the parties.
Up to now, when there was a court judgment and interest was payable, as a result, on damages for personal injuries, that interest was not subject to income tax. However, following a change in the rules of court in October 1980 it is expected that interest claimed in accordance with the rules of the Supreme Court, order 22, rule 1(8), will become payable in increasing numbers of personal injury accidents, which for one reason or another never come to formal judgment. They do not come to formal judgment, either because they are settled by a payment into court that is accepted or by an out-of-court settlement directly between the parties. In such cases the exemption from income tax provided by section 375A would not run. The cases of the kind that I have described are likely to increase in number as a result of the rule of the Supreme Court to which I referred, and I therefore commend the new clause, which extends the tax exemption to these two further classes of interest payment.

Mr. Robin F. Cook: The Opposition see no ground on which to quarrel with the new clause. There are many grounds for changing a tax system and there is little reason for an arrangement whereby our tax system is altered as a by-product of a change in court rules. I commend the Minister for having introduced a change to stop up an unforeseen and undesirable consequence of a change in court rules. We take no exception to the new clause.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 29

CAPITAL TRANSFER TAX: SCOTTISH AGRICULTURAL LEASES (FIXED TERMS)

'Where any part of the value of a person's estate immediately before his death is attributable to the interest of a tenant in an unexpired portion of a lease for a fixed term of agricultural property in Scotland and either he had been tenant of the said property continuously for a period of at least two years immediately preceding his death or he had become tenant of the said property by succession there shall be left out of account in determining the value transferred on the death any value associated with any prospect of renewal of the lease by tacit relocation.'—[Mr. Peter Rees.]

Brought up, and read the First time.

Mr. Peter Rees: I beg to move, that the clause be read a Second time.

Mr. Deputy Speaker: With this we may discuss new clause 30—Capital Transfer Tax: Scottish agricultural leases (tacit relocation)—and the following amendments: No. 173, in clause 94, page 82, line 45, at end insert—
'(3) Succession to a tenancy of agricultural property in Scotland for agricultural purposes shall not be a transfer of value unless it occurs for consideration in money or money's worth when the amount of such consideration shall be charged to Capital Transfer Tax as an asset in the estate of the deceased.'.
and Government amendment No. 226.

Mr. Rees: In Standing Committee there was a keen debate on amendment No. 453, initiated by my hon. Friend the Member for Galloway (Mr. Lang) and the hon. Member for Edinburgh, Central (Mr. Cook) on the capital transfer tax implications of the problem created by the


Agriculture (Miscellaneous Provisions) Act 1976 which, I am bound to say, without reopening old wounds, was not a very well thought-out measure. It was found to have a slightly different impact north of the border compared with its impact south of the border or west of Offa's Dyke. In England and Wales it created a new tenancy on the death of a tenant but in Scotland there was some kind of transmissible interest. I tread with a little diffidence, since I am not, by training, a Scottish lawyer. It created an asset—or was thought to—of a kind which passed, even though to a restricted class of persons. The Inland Revenue is charged only with the duty of administering the law which we enact. It reached the conclusion, rightly or wrongly, that that gave rise to a charge to capital transfer tax.
That is a matter for dispute. The hon. Member for Edinburgh, Central referred to some great legal opinion obtained by a highly reputable body north of the border. I am not concerned on this occasion to debate the merits of that. The Government were impressed by the arguments advanced from both sides of the Committee on that occasion. We felt that it was obviously wrong and undesirable that basically, in laymen's terms, the same circumstances should give rise to a charge to capital transfer tax north of the border but not south of the border or west of Offa's Dyke. I hope that the House will feel that we responded in full measure to the points made.
The results of our considerations are to be found in new clauses 29 and 30 and amendment No. 226, which contains a new schedule to add to the detail of the provisions.
We need the two new clauses because I believe that some leases are held by tacit relocation. That is a term of art which is known to Scottish lawyers. I have become familiar with it only in the last few weeks. After the termination of a lease for a fixed term—it is held by the tenant from year to year--the tenant's interest, whatever it be, passes on his death to a limited range of persons, mainly members of the family.
Another situation involves an agricultural tenancy for a term of years which is still in existence. On the death of a tenant that can also be passed to a limited class of persons. I understand that in Scotland 90 per cent. of such cases involve tacit relocation. In either event we felt it right that the matter should be put beyond doubt. There is a strong case for saying that there was a charge to capital transfer tax. In both cases there should be no charge to capital transfer tax except where there has been a transfer for consideration. In other words, where the tenancy passes by the normal course of law to the family, there should be no charge to capital transfer tax, but where some gain from the disposal is to be had there should be a charge to capital transfer tax.
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However, there is one exclusion—for those who have acquired the tenancy less than two years before the relevant death. The reason for that is that there might be an opportunity for abuse or avoidance. We thought that it was right to exclude transmission in that situation.
The starting date for the provisions will be 15 November 1976, the operative date of the Agriculture (Miscellaneous Provisions) Act 1976. However, there is to be no clawback if there has been a disposal before Royal

Assent has been given to this Finance Bill. There will be an option to choose the new or the old basis if a death occurs before Royal Assent: is given to this Bill.
We are discussing a complex series of provisions. I hope that the House, having considered them in depth, will feel that they do adequate justice to the point eloquently made my my hon. Friend the Member for Galloway and the hon. Member for Edinburgh, Central. I hope that they will be welcomed north of the border as exempting the agriculture community and tenant farmers, of whose affairs we heard this afternoon in a speech on a Ten-Minute Bill, from a charge to capital transfer tax from which their neighbours south of the border are already exempt. I commend the new clauses to the House.

Mr. Cook: Again, the Opposition do not take the slightest exception to the new clauses. It would, therefore, be for the convenience of the House if I made my remarks brief so that the House might progress to the perhaps more interesting and challenging debates later, when there might be a tension between the two sides of the House.
The Minister was generous enough to say that the new clauses come forth from a debate on amendments tabled by the Opposition and the hon. Member for Galloway (Mr. Lang). He tabled the same amendment, and our names, therefore, appeared in happy conjuction on the Order Paper. I am grateful to the Minister for responding to the anxieties expressed during that debate and for removing a real problem north of the border.
What I had regarded as a modest proposal and a modest change in the statute has resulted in a substantial change of impenetrable complexity. As far as I and those from whom I have sought advice can tell, the new clauses and amendment meet the point made in Committee. l do not see any difficulty in the two-year exemption. It is a prudent precaution. I do not think that it will give rise to difficulty in cases where fathers hand on to their sons, and may do so for several generations.
There are differences between the two sides of the House about some of the other provisions relating to capital transfer tax. The Minister will not be surprised if there is more austerity and longer debate when we reach those matters. I do not know when that will be. It could be later this afternoon or any time between now and noon on Thursday.
When we reach the capital transfer tax provisions we shall have something to say about the generosity that the Government have managed in relation to capital taxation. Nevertheless, it is right that this concession should be made. It is not, and never was, right to regard the transfer of a farm tenancy as the transfer of a marketable capital asset which can be sold at a profit.
I am grateful to the Minister for making the changes. I assume that even if the text as drafted falls short of some of the anxiety expressed it will have its impact on the Capital Taxes Office and make it more sympathetic to the problem. As the Minister said, the view taken by the Capital Taxes Office was never tested in a court. Had it been tested, a different view might have been taken. I am happy that, as a result of the new clauses, that will not be required.

Mr. Peter Fraser: I warmly welcome the new clauses and the Government amendment. I congratulate the Minister. The changes will be welcomed by farmers, and tenant farmers in particular. The Law


Society of Scotland has also been desperately anxious about the provision and will be relieved that we are making the change.
One point that is equally important as a matter of emphasis is that one of the alternative proposals was that, because capital transfer tax was not imposed on tenancies in England, one solution might be to change the basis of tenancies in Scotland. I am exceedingly relieved that that procedure, or device, was not adopted to eliminate the difficulty. If we had, for fiscal reasons, changed the basis of tenancies in Scotland, that would have been regarded with the greatest of suspicion. I should have thought that the device that we have used is the most welcome. It is also worthy of emphasis that the view of the Capital Taxes Office has not been tested in the courts, but that the matter is now put beyond doubt.
There has been some suspicion in Scotland—because the Capital Taxes Office has become more aggressive recently—that this provision comes about as a consequence of changes that have been made by the Government in earlier Finance Acts. That is untrue. If there is any charge to tax, it is a charge to tax that has been there since capital transfer tax was first introduced to the taxation of this country. I hope that that is now absolutely clear in Scotland.
It is also important, and will be extremely welcome in Scotland, that it is not simply a matter of looking to the imposition of capital transfer tax after the passage of the Bill through the House; it will go back to November 1976, possibly by a slightly elaborate route. That is something which will wholly deal with the point.
In view of the welcome that has been given to the new clause by the Opposition Front Bench, I hope that it is an indication that at any time in the future if there should be a Labour team in the Treasury, it will be taken to have given, through this provision, the clearest indication to the Scottish farming community that it can look to a "hands-off" attitude with regard to capital taxation, not only in the tenant farming sector but in the owner-occupied sector.
On behalf of all tenant farmers in Scotland I am grateful to the Minister of State for what he has done. The new clause is warmly welcomed.

Mr. Campbell-Savours: I shall intervene briefly. We all heard the comments which were made by my hon. Friend the Member for Edinburgh, Central (Mr. Cook) and the hon. Member for Galloway (Mr. Lang) in Committee on this matter. The Committee may have been swayed by the arguments which were put.
Since I have not had a great deal of time to assess the implications of the clauses, will the Minister of State give a clear undertaking to the House that there is no more in these clauses than was originally sought by the two hon. Members to whom I have referred? If that be the case, we can presume that the new clause will have the support of the House, even without the considerable consideration which should be due to it, but which it may not receive. I may not be here to hear the Minister of State wind up, because I have another engagement, but I assure him that I shall read his comments in the Official Report.

Mr. Ian Lang: I echo the warm welcome which my hon. Friend the Member for South Angus (Mr. Fraser) afforded to the concession which the Government have made. It reflects the reasoned approach which we

have made over a considerable time, as well as the arguments which I put in Committee. It is a relief to Back Benchers to find that their arguments do not fall on stony ground and that we were able to persuade our right hon. and hon. Friends of the strength of our case on this occasion.
As my hon. Friend the Member for South Angus said, these new clauses and amendments will be warmly welcomed in farming circles in Scotland. They also reflect the work which a number of my hon. Friends have put in on behalf of Scottish farmers. We had a wide-ranging series of meetings in addition to the discussions which I have had with Ministers. We have also had discussions with my right hon. Friend the Secretary of State for Scotland and my hon. Friend the Minister of State, Scottish Office. Over the past few weeks and months the Government have become well aware of how important that issue is in Scotland. It is a relief to see it met in this full-hearted and constructive way.
The hon. Member for Edinburgh, Central (Mr. Cook) said that this was a small point. I have tried to show that it is not a small point in the minds of tenant farming circles in Scotland. It is a relief to see the law in Scotland put on all fours with that in the rest of the United Kingdom and to see it done within the parameters of the Finance Bill rather than by amending the laws of land tenure in Scotland, which would have been a complicated and difficult process.
The amendments have been warmly welcomed in Scotland by bodies such as the National Farmers Union. That reflects the universally held view that it is highly undesirable that there should be any fiscal inequity between Scotland and England or any other part of the United Kingdom. That potential inequity was founded on a technicality in the difference between the leases in England and in Scotland. I understand that the main difference was that in England a new lease is created at the time of succession, unlike in Scotland.
I imagine that the cost to the Exchequer will be small. My hon. and learned Friend the Minister of State may be able to give the cost at some stage, but I imagine that the cost to the Exchequer will be small, whereas for individual tenant farmers in Scotland, it could have been severe. At one time there was talk of valuations of 25 per cent. of a notional open market value. That could have hit some farmers severely and it could have damaged the whole tenant farming sector. Where it would have struck, it would have struck deep. Therefore, it is all the more welcome that it is being removed.
The exception to which my hon. and learned Friend referred, whereby, if there is a consideration on the transfer of the lease, is acceptable. One would accept any such consideration to re-enter the tax net. The two-year exclusion to which he referred also seems reasonable. What has been recognised in the amendment is that the transfer of such an agricultural lease in Scotland is not the transfer of an asset so much as a transfer of a statutory right. It is a right which is not marketable or assignable and which can pass only narrowly to the immediate family, and even then only to a person who is considered to be a proper person to carry on the business of farming. Therefore, the narrow nature of the bequest with which we are concerned underlines the importance that it should not be taxable as an asset in the normal way.
I thank my right hon. and hon. Friends for the responsive way in which they have appreciated the threat


to the tenant farming sector in Scotland and also for ensuring that fiscal equity will continue to run in those matters on an even basis throughout the United Kingdom.

Mr. John MacKay: The tenant farming sector is an important part of the farming ladder in Scotland, as elsewhere in the United Kingdom. It is under considerable pressure, for various economic reasons. Anything which puts further pressure on it is to be deprecated. That problem was giving rise to considerable concern among tenant farmers who, like the rest of the farming industry, are not enjoying good times at present, especially on the hills. That is despite the great efforts made by my right hon. and hon. Friends in the Department of Agriculture and Fisheries for Scotland and in the Ministry in England.
On the hills especially there are considerable problems. Some of the farmers there will not be helped by some of the clauses in the Wildlife and Countryside Bill. Be that as it may, yesterday's problems for hill farmers will be offset by today's good news to the tenant farmers. If we cannot have a system of tenant farms which can be passed on from father to son and in which a farmer can go into a tenancy knowing that he can pass it on without considerable financial problems, the tenant farming scene in Scotland will begin to decline and will collapse.
If that happened, for many people the bottom of the farming ladder would be eroded. That would be a serious matter. All of us who represent rural areas in Scotland can thank the Treasury Bench for what they have done about that. Perhaps not many people were involved, but they were involved to a worrying degree in the financial problems which would have arisen. For them, and for the rural Members who represent them, I thank the Government for this part of the Finance Bill. It will greatly assist those people to pass on their tenancies from one generation to another without considerable financial damage.

Mr. Peter Rees: I am gratified to find such unanimity in the House. It is rare that one achieves that in capital transfer tax matters. I am sorry about the hint from the hon. Member for Edinburgh, Central (Mr. Cook), who has been so urbane this afternoon, that that unanimity may not persist when we deal with other capital transfer tax clauses.
I assure the hon. Member for Workington (Mr. Campbell-Savours)—the only Member for a constituency south of the border, apart from myself, who has ventured to intervene in this specialised Caledonian debate—that, arcane and extensive though the provisions are, they do no more than reflect and meet the point made both in Committee and in the House. He is at perfect liberty subsequently to read Hansard and compare what I have said with the detailed provisions. I know that he is an assiduous person—

Mr. George Foulkes: Far from the debate relating to purely Scottish interests, does not the Minister agree that, regrettably, far too many English Members have an interest? I regret that they own land in Scotland. The tenant farmers lease their land from someone and, regrettably, too many of the owners are English.

Mr. Rees: I usually find the hon. Gentleman's interventions engaging but irrelevant. However, that intervention was neither engaging nor relevant. No doubt he will raise more substantial points in due course.
I regret that the provisions should turn out to be so extensive and complex. They merely reflect the complexity of land tenure law and capital transfer tax law in Scotland. I do not think that this Administration can accept responsibility for either.
I wish to respond to the points raised by my hon. Friend the Member for South Angus (Mr. Fraser), who did not have the privilege of serving on the Committee. I do not believe that it ever entered our minds to change the basis of tenancy in Scotland. It would not be part of my limited responsiblities to attempt such an awe-inspiring task. I am happy to leave that to the Law Officers in Scotland and my right hon. and hon. Friends at the Scottish Office. I honestly do not believe that that thought ever crossed their minds.
I hope that the capital transfer tax officers cannot be characterised as aggressive. The Inland Revenue is charged only with administering the law that the House enacts. Inevitably, ambiguities must be resolved from time to time, and not always necessarily in favour of the taxpayer. I am happy to state categorically that the position that they may have taken in regard to individual cases was not on the instruction of the Government. It would have been improper for the 'Government to intervene in individual cases.
If we find the law to be unattractive or inappropriate, it is for us to alter it. We must then stand back and leave the Inland Revenue to administer it as it finds it. It would be improper for me or any of my right hon. and hon. Friends to intervene in the slightest degree in such matters. We have taken a view about the law in response to the many points made, both in Committee and outside, with such eloquence by hon. Members. The fruits of our deliberations are to be found on the Amendment Paper, although in a slightly extended form.
It would be inappropriate for me to comment on the entirely hypothetical position that might be adopted by a Labour Administration, if there were to be one, on the arcane area of capital transfer tax. It would be interesting to explore their general approach to capital transfer tax problems as we develop our debate. I had better leave that point there, but no doubt the hon. Member for Edinburgh, Central will disclose, with his usual candour and charm, what plans he might have if he were charged with responsibility in that area. He might care to enlarge a little and tell us his plans for a wealth tax—

Mr. Cook: I assure the Minister that as the Opposition tabled the amendment in Committee it would be most improbable that a future Labour Government would seek to disturb the provision that the Minister is introducing.

Mr. Rees: I readily accept that point. If I understand the tenor of the point made by my hon. Friend the Member for South Angus, he was going a little wider. I have no doubt that, within the rules of order, and at a suitable moment, the hon. Member for Edinburgh, Central will take the opportunity to assure the agricultural interests both north and south of the border that the Labour Party has their interests at heart when considering the extensions of capital transfer tax that have been lightly promised at various times during the debates, and also its plans for a


wealth tax, which it is seriously considering. Perhaps that point lies without the scope of the debate. It would not be for me to encourage or press the hon. Gentleman in that regard.
I am gratified that there should be such unanimity of view in the House about this point. I only hope that unanimity persists. I commend the new clauses and the schedule to the House.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New clause 30 read a Second time, and added to the Bill.

New Clause 32

MEDICAL INSURANCE AND TREATMENT

'(1) At the end of section 62 of the Finance Act 1976 (exceptions from general charge) there shall be inserted—
(8) Section 61 above does not apply where the benefit consists—

(a) in providing the employee with medical treatment outside the United Kingdom (including providing for him to be an in-patient) in a case where the need for the treatment arises while the employee is outside the United Kingdom for the purpose of performing the duties of his employment; or
(b) in providing insurance for the employee against the cost of such treatment in such a case;
and for the purposes of this subsection, medical treatment includes all forms of treatment for, and all procedures for diagnosing, any physical or mental ailment infirmity, or defect. ".

(2) Section 68 of that Act (medical insurance) shall cease to have effect.

(3) In section 15(7)(a) of the Taxes Management Act 1970 and in section 61(2) of the said Act of 1976 for the words "to 68" there shall be substituted the words "to 67".

(4) This section has effect for the year 1982–83 and subsequent years of assessment. '.—[Mr. Lawson.]

Brought up, and read the First time.

Mr. Lawson: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this we may also take the following amendments:
Amendment (a) to the proposed new clause, in subsection (2) at end insert
'except so far as it applies to members of the family or the household of the person employed.'.
Government amendment No. 140.
Amendment No. 141, in clause 69, page 62, line 11, at end add
'except for members of the family or the household of the person employed'.

Mr. Lawson: As will be clear to the House, especially to the hon. Member for Edinburgh, Central (Mr. Cook), the new clause replaces clause 69. The bulk of it—namely, subsections (2), (3) and (4)—is exactly the same as clause 69. The new part is subsection (1), which is introduced in response to the proper point made in Committee by the hon. Member for Edinburgh, Central. He was concerned about the case of the employee who requires medical treatment when he falls ill while working abroad for his employer. He was concerned that there should be full cover in the Bill for such a case—as there has been for lower paid employees under the 1976 legislation—to provide an additional statutory concession that extended

the cover to the higher-paid employees. He asked that that point be fully met. He also asked that it should be done by means other than an additional statutory concession.
In Committee, my right hon. and learned Friend the Chief Secretary undertook to make arrangements to deal with the matter, and that we have done. New clause 32(1) deals fully with the case of an employee who requires treatment when he falls ill while working abroad. In giving full coverage for both the lower and higher paid employees, it gives a statutory form to what has hitherto been the additional statutory concession A5(b). I hope that the hon. Member for Edinburgh Central is fully satisfied that we have met his point.
The more substantial matter which falls to be debated is amendment (a), which is basically the same as amendment No. 141, which the Opposition tabled to clause 69. Amendment (a) seeks to limit the scope of the clause. The clause, whether in its original form or as new clause 32, pursues our manifesto pledge of 1979 to restore tax relief on employer-employee medical insurance schemes. There was a long debate in Standing Committee.
The purpose of the amendment is to remove tax incentive benefits of a family nature. Enlightened employers make provision for private medical insurance schemes for their employees. Frequently they extend the schemes by virtue of what are known as family schemes, which leading insurance companies offer, to include provision for the families of employees.
We believe that that is to be encouraged. It accords with our general belief that alongside the National Health Service there should be a thriving private medical sector. It accords also with our views on the importance of the family unit in society. It is right that when extending this concession we should encourage an amployer who sees some value in including his employees' families in the arrangements. That is what the Opposition seek to prevent.
It may be suggested that the provision of private medical treatment for an employee may be in his employer's business interest because of the greater flexibility of the timing of hospital treatment. It may be argued further that there can be no commercial justification for making provision for the employee's family. That is the line that the hon. Member for Edinburgh, Central will probably develop. No doubt he will argue that it is a pure perk and of no benefit to the employer.

Mr. Cook: That is right.

Mr. Lawson: We do not accept that. Regard by an employer for the welfare of his employee by including his family in the arrangements should not be discouraged. It is often in an employer's commercial interest to do so because his business can be as much disrupted if an employee has to be absent to take care of his family when his, the employee's, wife is admitted to hospital at an inconvenient time as it would be if the illness were that of the employee himself. There are practical considerations to be taken into account but I place less weight on those.
The amendment would require the Inland Revenue to apportion every family premium between that part applying to the cover for the employee himself and the part that covers the family. It would be required to take a tax charge on the latter part only. There would be some administrative complexity. For all these reasons I shall ask the House in due course to reject the amendment.

Mr. Cook: With the new clause we come to the end of that happy period during which both sides of the Chamber were touching gloves, as the Minister of State put it, and being remarkably urbane to each other. The new clause opens up a profound area of disagreement between the Government and the Opposition. I shall gently lower the Financial Secretary into the area of disagreement by welcoming the form of the new clause. As the hon. Gentleman indicated candidly, frankly and generously, I raised the issue in Committee. I do not know whether that was an attempt to gain my recognition of the new clause. However, he generously recognised that I had done so.

Mr. Lawson: It was more than generous.

Mr. Cook: Even for himself, the Financial Secretary on this occasion was more than usually generous. I am glad that he has responded to my argument in Committee. We shall be arguing that there is no case for exempting from tax the medical insurance premiums paid for medical care within Britain. However, there were no grounds for taxing insurance premiums paid by companies to cover their employees who go abroad to work and who fall ill, where they have to meet the cost of medical care. It is clear that that was never a benefit in kind. It was quite properly a charge on the employer. In those circumstances the employee should not be rendered liable to an income tax charge.
The previous Labour Government are frequently criticised for imposing unreasonable, onerous and penal levels of taxation on the population. However, that Government saw fit to create an exemption for employees working abroad in the circumstances that I have outlined. As the Financial Secretary knows to his chagrin, in the Government's haste to give a stimulus to private medical care, a move which is contained in the rest of the clause, they went ahead with an original clause which, incidentally, abolished the exemption made in the 1976 Act. I welcome the fact that the Treasury Bench has come forward and rectified that error following it being pointed out to it. At least we have a clause in an approved form with the exemption preserved.
The Financial Secretary was equally generous in saying candidly that the bulk of the new clause is the same as the present clause 69, a clause to which we took exception in Standing Committee. The main thrust of the clause is to remove from taxation medical insurance premiums which are plainly intended as a benefit in kind. If the new clause is accepted by the House, we shall have in effect the same provision as is contained in clause 69 with the one modification that the exemption will be carried forward.
We have attempted by means of amendment (a) at least to limit the scope of the new clause. We have attempted to limit it in its scope and application to the employee and not to his family. I take with a large dose of salt the Financial Secretary's suggestion that by tabling the amendment the Opposition are striking at the heart of family life and the family as an institution in our society.
We are merely attempting to limit the damage that the clause will inflict, not perhaps on the family but on the revenue received by the Treasury. We were assured repeatedly in Committee that the Treasury needed every penny that it could obtain. However, in this clause we find a concession. Our purpose is to limit that concession. We are seeking to do so on the lines that were adopted when the clause was defended in Committee.
The right hon. Gentleman referred to the grounds of defence. One of the main ones adopted in defending the concession was that it could frequently be in an employer's interest for the employee to choose when to have surgery and, therefore, to be able to choose when to take his time off work at a time least inconvenient to the employer. I recognise that there may be substance in that argument. However, it is becoming a shade tenuous. Comparatively few employees will find that their employers are willing to come and go with them when it comes to their taking time off to have operations. I do not accept that there is any substance in the argument that the wife and children of an employee need to be similarly insured so that the children may also choose to have their operation at a tithe that is least inconvenient to the employer. That argument is plainly preposterous. It can be advanced in defence of the proposition contained in the clause only because the clause itself is illogical and rationally indefensible.
When the new clause takes its place in the Bill it will replace clause 69, which is placed in a chapter headed "Benefits in kind". There are four other clauses in the chapter. Each of those four other clauses provides for additional taxation of benefits in kind. We do not take exception to the principle of most of the clauses.
In principle, it is desirable that the employee should be subject to income tax on the basis of the cost to the employer of the benefit in kind. In practice, it was also apparently necessary for those clauses to be introduced because, as we were told each time we debated them the Treasury needs the money.
Having gone through those four clauses, in which additional tax revenue is raised by extending taxation to benefits in kind, we come to clause 69 or, when the Bill is marshalled after Report, to the new clause before us now. Here we find, instead of raising additional revenue by extending the scope of taxation of benefits in kind, an entirely novel concession, and extension and restoration of a concession which existed until five years ago. In other words, the principle that is otherwise applied in this chapter is reversed and money is given away rather than taken in.
I put it to the Financial Secretary, who has argued that the concession should apply not only to the employee but to the employee's wife and children and one knows not what other kin, that it would be plainly absurd for anyone to argue that the other benefits in kind in this chapter could be extended to the family of the employee without incurring a tax charge. Could it be argued, for instance, that members of the employee's family could be given concessions of car fuel, transport vouchers or credit tokens without attracting a charge? Of course it could not. It is perfectly right that such benefits should attract a tax charge just as it is right when applied to the employee himself.
Why, then, should the Treasury depart from the principle which it has followed in the other clauses in the chapter? Is it on any ground of fiscal equity? On the contrary, if the new clause is accepted and takes the place in the Bill of clause 69, we shall not create greater fiscal equity, but a new inequity between those who receive medical insurance premiums as a benefit in kind and those who receive transport vouchers or credit tokens and who will be taxed on them for the first time. Nor can it be pretended that any wider economic purpose is served be the new clause. Some breath taking suggestions have been made about the way in which he Bill will assist economic recovery. It has even been suggested that the provision to


allow those made redundant to plough their money back into new enterprises will assist economic recovery. Not even a Conservative Treasury, however, has dared to suggest that providing exemption for payments into private medical insurance schemes will stimulate the economy and pave the way for wider economic recovery.
Why are we asked to approve this new clause, which runs counter to the general tenor of the Bill and to that of this chapter on benefits in kind? There is only one answer. Those who sat in the Committee will know that it is intended to give a stimulus to private medicine and to meet the dogmatic prejudice of Conservative Members that the private sector is more praiseworthy than the public sector even in health care. The Financial Secretary and other members of the Committee know what we think of that view because we debated it at length in Committee and it is not necessary to debate it again today. Our general view is that the private sector in health care is parasitical. It makes no contribution to the training of medical staff, although that is the most experienced, expensive and precious asset of our Health Service. Yet it depends on that staff for its very existence. It makes no attempt at genuine competition with the National Health Service. It clearly and deliberately confines its care to those types of surgery which are most easily carried out, with the least complication and the most profit. There is no attempt to replicate, for example, the geriatric, psychiatric or maternity care services although these constitute half of the demands on the National Health Service. In other words, it can make a profit because it leaves the loss-makers and the risk-takers for the public sector to carry.
We are all entitled to our prejudices. Labour Members have a prejudice in this matter. We believe that the right to health care should not be influenced by the depth of the pocket, and its provision should not be subject to considerations of profit or the rate of return on capital. Conservative Members have their prejudices, too, but we do not share them. It is a free country. Both sides are entitled to their prejudices. The time will come when we must submit our respective prejudices to the test of the electorate and we shall see which it prefers.
At issue today, however, is whether it is proper for us to warp the tax system to favour our social prejudices, for that is what the Financial Secretary is asking the House to do. The Financial Secretary and the hon. Member for Braintree (Mr. Newton), the Whip, will recall the interesting debate in Committee when a new clause was proposed by their hon. Friend the Member for Cornwall, North (Mr. Neale), who I regret is not present today. He wished to extend the concession which the Government have made to those who obtain benefit in kind in medical insurance premiums paid by their company to individuals who pay their own medical insurance premiums. In rebutting that new clause in Committee, the Chief Secretary, speaking of "socially desirable goals", said:
The extent to which such goals should be advanced by taxation concessions is highly debatable. There are few exceptions to the general principle that one does not do that … There is no doubt that as our goal is to limit the total tax burden, and as in present circumstances that is extremely difficult to achieve . . we make our task no easier by eroding the tax base."—[Official Report, Standing Committee E, 30 June 1981; c. 1017.1]
In rebutting his hon. Friend's new clause with those words the Chief Secretary demolished the case for the new

clause now before us. Had he accepted his hon. Friend's new clause he would have had to find the money to pay for that concession from elsewhere in the tax revenue. But if he was right to tell his hon. Friend that he could not accept a concession for individuals paying private medical insurance premiums, it must logically follow that it is wrong to make a parallel concession to the far greater number of people who obtain a benefit in kind by having their medical insurance premiums paid by the company for which they work. Plainly, it cannot be wrong for the Chief Secretary or the Financial Secretary to argue that socially desirable goals would not be served by accepting a concession in respect of individuals and right to ask the House to reverse the principle for employees for whom a corporate scheme is made.
In reality, we are faced with an expensive sop to the dogma of Conservative Members. We have been told by the Government that they cannot afford to uprate personal allowances to take pensioners out of income tax and that it is necessary to tax unemployment benefit because the Government need the money. It is intolerable for the House to be told by the same Government that they can find the money to let out of the tax net medical insurance premiums paid by a company on behalf of its employees, their wives and children and, indeed, any other members of their families. That is an intolerable contrast against which the Opposition will vote tonight.

6 pm

Sir William Clark: I trust that my right hon. Friend will resist the amendment. I am sure that many people cannot understand this antagonism towards private insurance. If, having paid his taxes, a taxpayer wants to put his money into BUPA, he is able to do so, and I would not object, just as I would not object if he wanted to put it into bingo. I cannot think why the Opposition are against private medicine schemes, because in my view they complement the National Health Service.
No doubt the hon. Member for Edinburgh, Central (Mr. Cook), with his usual perspicacity, saw the recent review which revealed that one in every 15 of the population is covered by private insurance. Therefore, we should put this matter to the electorate and see what the electorate thinks about the Labour Party's proposal to abolish private insurance. That research has proved that the waiting list for NHS operations has been reduced by about 100,000 because of the number of people now taking operations under private medicine.
The hon. Member for Edinburgh, Central has got it all wrong. We are not talking about medical insurance in Britain or about treatment. We are talking about treatment abroad. I am sure that my right hon. Friend will agree that treatment abroad is essental and that if an employee goes abroad, he should be able to obtain medical treatment. If there is a corporate medical policy for the employee, why should not his dependants enjoy that benefit as well? I hope that my right hon. Friend will have nothing to do with the amendment.
Do not let us get involved with the political argument about whether we should or should not have private medicine. This envy is quite ridiculous. There is an admirable case for the new claause as it stands to replace clause 69, and I urge my right hon. Friend to resist the amendment to the utmost.

Mr. Richard Wainwright: It is not necessary in any way to share the prejudices of the Labour segment of the


Opposition against private health schemes in order to support the amendment, and neither I nor my Liberal colleagues support those prejudices. For all its defects, the private health sector adds a little to our total pool of health resources, and so long as the NHS, especially the rebuilding of our antiquated hospitals, is so crippled, any addition to the pool of health service available is to be welcomed.
Nevertheless, I wholeheartedly support the amendment because the new clause deals with the most explicit and blatant part of the Government's U-turn in what, two years ago, they said was their great campaign to eliminate perks. They have done nothing of the sort. The new clause blatantly provides a most extraordinary privileged perk to certain employees of companies that can afford this breach of tax equity.
The Government's campaign against perks is in ruins. The Inland Revenue recently published the scale of taxation of free petrol provided by employers, and a derisory scale it is. It is a most gentle tap on the knuckles, which will scarcely be perceived at all by those who enjoy the extraordinary perk and privilege of free petrol for their private motoring. I could give other examples.
However, this perk is to be explicitly included in the statute, and that is an offence against tax equity. It will add to the enormous damage that perks do to industrial relations and help to divide "them" from "us".

Mr. Anthony Fell (Yarmouth): Who are "them" and "us"?

Mr. Wainwright: The hon. Gentleman gives it away by asking that question.

Mr. Fell: l merely asked the question because the hon. Gentleman used that phrase. What does he mean by it?

Mr. Wainwright: No one representing an industrial constituency can be unaware of the unhappy position in which, egged on by this confrontational Government, British industry consists of "them" and "us". Every action of the Conservative Front Bench aggravates the confrontational atmosphere in British industry which most of us want to eliminate.
The Government's total failure to make any serious attack upon the evil of tax-free perks, and their provocative new clause, show how far down that vicious road they are prepared to go. For that reason, I and my hon. Friends—I understand my Social Democrat friends as well—will be voting for the Labour amendment.

Mr. Foulkes: The hon. Member for Colne Valley (Mr. Wainwright) once more speaks on behalf of his absent Social Democrat friends, who on this occasion are undoubtedly in Warrington.

Mr. John Maxton: "Wawwington."

Mr. Wainwright: I am grateful to the hon. Member for South Ayrshire (Mr. Foulkes) for referring to the absence of certain Members from the House. He must be aware of the three totally empty Labour Benches in front of him and the two empty Labour Benches behind me.

Mr. Foulkes: My hon. Friends will flood through the Lobby ere the hour is out. I do not think that we can say the same for the Social Democrats.
The hon. Gentleman talked about perks, and seemed to suggest that this was the only perk allowed for in the Bill.
If he recalls our Committee discussions on capital transfer tax, capital gains tax and all the concessions given to many of the rich, he will realise that this is one of many perks being given by the Government to the already well off.
I hesitate to correct my hon. Friend the Member for Edinburgh, Central (Mr. Cook), who talked about prejudices. That was a most inappropriate term. It might perhaps be better to say that Labour Members have informed opinions which they set against the prejudices of Conservative Members.
I shall not repeat the long debate in Committee on this subject, but it was alleged by Conservative Members that expenditure on the NHS was growing rapidly. We had a fairly tortuous debate about whether it was growing by 1 per cent. or 2 per cent. in real terms. Unfortunately, we were dragged into an argument on grounds set by the Government, and I regret that we fell into their trap in such a way.
These days, when we know of the need in the Health Service, it is ludicrous even to talk about a growth of 1 per cent. or 2 per cent. as anything but miserly and totally inadequate. We only have to look at some of the reports. There was the Black report on inequalities in the Health Service and the Timbury report on the inadequacy of services for psycho-geriatrics and geriatrics in Scotland. Many of those reports have referred to the total inadequacy of current provision in the Health Service and have come to the conclusion that we need substantial increases in expenditure.
During our discussions in Committee, Conservative Members failed to recognise the massive public subsidy that is already given to the private sector. There is already far too large a private sector, particularly south of the border. A massive public subsidy is already given, without giving this additional tax benefit. For example, the doctors and nurses who work in private hospitals and tend private patients have been trained at public expense. Private hospitals and nursing homes get blood from the blood transfusion service at public expense, although I am not suggesting that that facility should be withdrawn. I am suggesting that in the long term we should not have a private sector, but if we have services such as the blood transfusion service provided for the private sector, that sector should be paying the full cost, which it is not doing in present. There is already a substantial subsidy to the private sector of medicine.
The point of the clause, as outlined by the Financial Secretary today, is amazing. He spoke about providing greater flexibility in the timing of hospital treatment in the interests of the employer. Basically, that is an elaborate way of saying that he wants some people to be able to jump the queue—people who, in medical terms, are not at the head of the queue and who, in the clinical judgment of the consultants and doctors, should not receive immediate treatment. The right hon. Gentleman says that they should receive it because they are able to pay or because their employers can pay for them.
Let us suppose that the glorious day that the Financial Secretary and the Government would like arrives, and that all employers take advantage of these schemes. Let us suppose that all employers of labour say "This is a great tax advantage and we shall contract all our employees into BUPA, PPP or whatever." Ultimately, we shall reach the stage at which all employees apart from people on social security and those who are unemployed, are in the same


boat. That is not the flexibility about which we are talking or which the Financial Secretary would say was the important aspect of the clause.
That gives away what is behind the Government's argument. They do not want all employees to take advantage of such schemes. They want a privileged sector, a particular group of employees to be provided with these benefits.
If more resources are to be provided for the National Health Service—we are anxious that they should be provided—I would not want them to be provided from money raised by individuals or firms contributing to BUPA or PPP. The money can be raised more appropriately through national insurance contributions, through the amount that everyone pays towards the cost of the National Health Service. If everyone pays according to his ability to pay, through contributions to the National Health Service, and if as a result we build up the NHS into the excellent provision that it should be, providing a whole range of services for people in need, treatment will be provided according to need and according to the clinical judgment of doctors and consultants. There will be no waiting lists and queues that people are encouraged to jump.
Trade union leaders have to negotiate these privileges for their members because the Government have put them in that position. I do not accept that and I do not condone it, but I understand it, because it is the sort of philosophy that the Government are encouraging. People buy a privilege to try get to something better in the rat race that is encouraged by the Government.
We envisage a system in which additional resources are provided for the National Health Service not through private arrangements to provide privileged treatment for a few, but substantial resources provided through national insurance contributions to improve the NHS so that treatment is provided according to medical need, and not according to ability to pay.

Mr. Lawson: Running through the speech of the hon. Member for South Ayrshire (Mr. Foulkes), as it did through his speeches in Committee upstairs, was the illusion that there was a fixed pool of resources for health care, and that any growth of the private sector must be at the expense of the National Health Service. That is not so. The Opposition do not believe it. They are always calling for extra resources to go into health care and medical treatment through the NHS.
Private health care through BUPA and other schemes is in addition to the other resources going into health care and medical treatment, not in replacement of them.
The hon. Member for Edinburgh, Central (Mr. Cook) suggested that what we proposed was out of line with the general treatment of benefits in kind. That is incorrect. The general treatment—there are one or two exceptions, for good reasons—is that for higher-paid employees such benefits are liable to tax, but for lower-paid employees they are not.
The previous Government had a tremendous prejudice and animus against anything to do with private health care. They thought it monstrous if an employer had the temerity to give, as a benefit in kind, membership of BUPA or Private Patients Plan to his employees. Under that

Government, almost uniquely, the lower-paid employees and not only the higher-paid were caught for tax on that benefit.
We are putting the benefit on all fours with the other perks, the benefits in kind, of which the motor car is the most important. For the higher-paid employee there will still be a tax liability, but for the lower-paid employee there will not. That is what the Opposition oppose.

Mr. Cook: If the right hon. Gentleman is founding his argument on the basis that he is merely bringing taxation of this benefit in kind in line with the taxation of other benefits in kind, why does this clause follow clause 67, dealing with transport vouchers, and clause 68, dealing with credit tokens, both of which are explicitly designed to catch those earning less than £8,500 a year as well as those earning more than that?

Mr. Lawson: Because, as has already been explained, the benefits covered by those clauses are not benefits in kind but are to all intents and purposes benefits in cash, masquerading as benefits in kind.
A further point about the health schemes is that in many companies membership of a group medical insurance scheme is compulsory; the employee effectively has no choice. He is told that part of the conditions of employment are that he should be a member.
I shall not waste the time of the House discussing the intervention of the hon. Member for Colne Valley (Mr. Wainwright), because when we had an important debate on the matter in Committee he did not even trouble to vote.
I ask the House to accept the new clause and reject the Opposition's amendment.

Question put, That the clause be read a Second time:—

The House divided: Ayes 282, Noes 215.

Division No. 267]
[6.18 pm


AYES


Adley, Robert
Brown, Michael(Brigg &amp; Sc'n)


Aitken, Jonathan
Browne, John (Winchester)


Alexander, Richard
Bruce-Gardyne, John


Amery, Rt Hon Julian
Bryan, Sir Paul


Ancram, Michael
Buchanan-Smith, Alick


Arnold, Tom
Buck, Antony


Aspinwall, Jack
Bulmer, Esmond


Atkins, Rt Hon H.(S'thorne)
Burden, Sir Frederick


Atkins, Robert(Preston N)
Butcher, John


Atkinson, David (B'm'th,E)
Butler, Hon Adam


Baker, Kenneth(St.M'bone)
Cadbury, Jocelyn


Baker, Nicholas (N Dorset)
Carlisle, John (Luton West)


Banks, Robert
Carlisle, Kenneth (Lincoln)


Beaumont-Dark, Anthony
Chalker, Mrs. Lynda


Bendall, Vivian
Chapman, Sydney


Bennett, Sir Frederic (T'bay)
Clark, Sir W. (Croydon S)


Benyon, W. (Buckingham)
Clarke, Kenneth (Rushcliffe)


Berry, Hon Anthony
Clegg, Sir Walter


Best, Keith
Cockeram, Eric


Bevan, David Gilroy
Colvin, Michael


Biffen, Rt Hon John
Cope, John


Biggs-Davison, John
Cormack, Patrick


Blackburn, John
Corrie, John


Blaker, Peter
Cranborne, Viscount


Body, Richard
Critchley, Julian


Bonsor, Sir Nicholas
Crouch, David


Boscawen, Hon Robert
Dean, Paul (North Somerset)


Bottomley, Peter (W'wich W)
Dickens, Geoffrey


Bowden, Andrew
Douglas-Hamilton, Lord J.


Boyson, Dr Rhodes
du Cann, Rt Hon Edward


Braine, Sir Bernard
Dunlop, John


Bright, Graham
Dunn, Robert (Dartford)


Brinton, Tim
Durant, Tony


Brittan, Leon
Dykes, Hugh


Brooke, Hon Peter
Eden, Rt Hon Sir John


Brotherton, Michael
Edwards, Rt Hon N. (P'broke)






Eggar, Tim
MacGregor, John


Emery, Peter
MacKay, John (Argyll)


Eyre, Reginald
Macmillan, Rt Hon M.


Fairgrieve, Russell
McNair-Wilson, M. (N'bury)


Faith, Mrs Sheila
McNair-Wilson, P. (New F'st)


Fell, Anthony
McQuarrie, Albert


Fenner, Mrs Peggy
Madel, David


Finsberg, Geoffrey
Major, John


Fisher, Sir Nigel
Marland, Paul


Fletcher, A. (Ed'nb'gh N)
Marlow, Tony


Fletcher-Cooke, Sir Charles
Marshall, Michael (Arundel)


Fookes, Miss Janet
Marten, Neil (Banbury)


Forman, Nigel
Mates, Michael


Fowler, Rt Hon Norman
Maude, Rt Hon Sir Angus


Fox, Marcus
Mawby, Ray


Fraser, Rt Hon Sir Hugh
Mawhinney, Dr Brian


Fraser, Peter (South Angus)
Maxwell-Hyslop, Robin


Gardiner, George (Reigate)
Mayhew, Patrick


Gardner, Edward (S Fylde)
Mellor, David


Garel-Jones, Tristan
Miller, Hal (B'grove)


Glyn, Dr Alan
Mills, Iain (Meriden)


Goodhart, Philip
Mills, Peter (West Devon)


Goodlad, Alastair
Miscampbell, Norman


Gorst, John
Moate, Roger


Gow, Ian
Monro, Hector


Gower, Sir Raymond
Montgomery, Fergus


Grant, Anthony (Harrow C)
Moore, John


Gray, Hamish
Morgan, Geraint


Greenway, Harry
Morris, M. (N'hampton S)


Grieve, Percy
Morrison, Hon C. (Devizes)


Grist, Ian
Morrison, Hon P. (Chester)


Grylls, Michael
Mudd, David


Gummer, John Selwyn
Murphy, Christopher


Hamilton, Hon A.
Myles, David


Hamilton, Michael (Salisbury)
Neale, Gerrard


Hampson, Dr Keith
Needham, Richard


Hannam,John
Neubert, Michael


Haselhurst, Alan
Newton, Tony


Hastings, Stephen
Normanton, Tom


Hayhoe, Barney
Nott, Rt Hon John


Heddle, John
Onslow, Cranley


Henderson, Barry
Oppenheim, Rt Hon Mrs S.


Hicks, Robert
Page, John (Harrow, West)


Higgins, Rt Hon Terence L.
Page, Rt Hon Sir G. (Crosby)


Holland, Philip (Carlton)
Page, Richard (SW Herts)


Hooson, Tom
Parkinson, Cecil


Howell, Rt Hon D. (G'ldf'd)
Parris, Matthew


Howell, Ralph (N Norfolk)
Patten, Christopher (Bath)


Hunt, David (Wirral)
Patten, John (Oxford)


Hunt, John (Ravensbourne)
Pattie, Geoffrey


Hurd, Hon Douglas
Pawsey, James


Irving, Charles (Cheltenham)
Peyton, Rt Hon John


Jenkin, Rt Hon Patrick
Pink, R. Bonner


Jessel, Toby
Pollock, Alexander


Johnson Smith, Geoffrey
Powell, Rt Hon J.E. (S Down)


Jopling, Rt Hon Michael
Prentice, Rt Hon Reg


Joseph, Rt Hon Sir Keith
Price, Sir David (Eastleigh)


Kaberry, Sir Donald
Prior, Rt Hon James


Kellett-Bowman, Mrs Elaine
Proctor, K. Harvey


Kimball, Marcus
Raison, Timothy


King, Rt Hon Tom
Rathbone, Tim


Kitson, Sir Timothy
Rees, Peter (Dover and Deal)


Knight, Mrs Jill
Renton, Tim


Knox, David
Rhodes James, Robert


Lamont, Norman
Rhys Williams, Sir Brandon


Lang, Ian
Ridley, Hon Nicholas


Langford-Holt, Sir John
Ridsdale, Sir Julian


Latham, Michael
Rifkind, Malcolm


Lawrence, Ivan
Roberts, M. (Cardiff NW)


Lawson, Rt Hon Nigel
Roberts, Wyn (Conway)


Lee, John
Rossi, Hugh


Lennox-Boyd, Hon Mark
Rost, Peter


Lester, Jim (Beeston)
Sainsbury, Hon Timothy


Lewis, Kenneth (Rutland)
St. John-Stevas, Rt Hon N.


Lloyd, Ian (Havant &amp; W'loo)
Scott, Nicholas


Lloyd, Peter (Fareham)
Shaw, Giles (Pudsey)


Loveridge, John
Shelton, William (Streatham)


Luce, Richard
Shepherd, Colin (Hereford)


Lyell, Nicholas
Shepherd, Richard


Macfarlane, Neil
Silvester, Fred





Skeet, T. H. H.
Trotter, Neville


Speed, Keith
van Straubenzee, W. R.


Speller, Tony
Vaughan, Dr Gerard


Spence, John
Viggers, Peter


Spicer, Jim (West Dorset)
Waddington, David


Spicer, Michael (S Worcs)
Wakeham,John


Sproat, Iain
Waldegrave, Hon William


Squire, Robin
Walker, B. (Perth)


Stainton, Keith
Wall, Sir Patrick


Stanbrook, Ivor
Walters, Dennis


Stanley, John
Ward, John


Steen, Anthony
Warren, Kenneth


Stevens, Martin
Watson, John


Stewart, Ian (Hitchin)
Wells, John (Maidstone)


Stewart, A.(E Renfrewshire)
Wells, Bowen


Stokes, John
Wheeler, John


Stradling Thomas, J.
Whitney, Raymond


Tapsell, Peter
Wickenden, Keith


Taylor, Teddy (S'end E)
Williams, D.(Montgomery)


Tebbit, Norman
Winterton, Nicholas


Temple-Morris, Peter
Wolfson, Mark


Thomas, Rt Hon Peter
Young, Sir George (Acton)


Thompson, Donald
Younger, Rt Hon George


Thorne, Neil (Ilford South)



Thornton, Malcolm
Tellers for the Ayes:


Townend, John (Bridlington)
Mr. Spencer Le Marchant and


Townsend, Cyril D, (B'heath)
Mr. Carol Mather.


Trippier, David





NOES


Adams, Allen
Eadie, Alex


Allaun, Frank
Eastham, Ken


Anderson, Donald
Edwards, R. (W'hampt'n S E)


Archer, Rt Hon Peter
Ellis, R. (NE D'bysh're)


Ashley, Rt Hon Jack
Ellis, Tom (Wrexham)


Ashton, Joe
English, Michael


Atkinson, N.(H'gey,)
Ennals, Rt Hon David


Barnett, Guy (Greenwich)
Evans, Ioan (Aberdare)


Bennett, Andrew(St'kp't N)
Evans, John (Newton)


Bidwell, Sydney
Ewing, Harry


Booth, Rt Hon Albert
Field, Frank


Boothroyd, Miss Betty
Fitch, Alan


Bottomley, Rt Hon A.(M'b'ro)
Fletcher, Ted (Darlington)


Bray, Dr Jeremy
Foot, Rt Hon Michael


Brown, Hugh D. (Provan)
Ford, Ben


Brown, Ron (E'burgh, Leith)
Forrester, John


Callaghan, Rt Hon J.
Foster, Derek


Callaghan, Jim (Midd't'n &amp; P)
Foulkes, George


Campbell-Savours, Dale
Fraser, J. (Lamb'th, N'w'd)


Canavan, Dennis
Freeson, Rt Hon Reginald


Cant, R. B.
Freud, Clement


Carter-Jones, Lewis
Garrett, John (Norwich S)


Clark, Dr David (S Shields)
George, Bruce


Concannon, Rt Hon J. D.
Gilbert, Rt Hon Dr John


Conlan, Bernard
Ginsburg, David


Cook, Robin F.
Golding, John


Cowans, Harry
Graham, Ted


Cox, T. (W'dsw'th, Toot'g)
Grant, George (Morpeth)


Craigen, J. M.
Grant, John (Islington C)


Crowther, J. S.
Grimond, Rt Hon J.


Cryer, Bob
Hamilton, James (Bothwell)


Cunningham, G. (Islington S)
Hardy, Peter


Cunningham, Dr J. (W'h'n)
Harrison, Rt Hon Walter


Dalyell, Tam
Hart, Rt Hon Dame Judith


Davidson, Arthur
Hattersley, Rt Hon Roy


Davies, Rt Hon Denzil (L'lli)
Haynes, Frank


Davies, Ifor (Gower)
Healey, Rt Hon Denis


Davis, Clinton (Hackney C)
Heffer, Eric S.


Davis, T. (B'ham, Stechf'd)
Hogg, N. (E Dunb't'nshire)


Deakins, Eric
Holland, S. (L'b'th, Vauxh'll)


Dean, Joseph (Leeds West)
Home Robertson, John


Dempsey, James
Homewood, William


Dewar, Donald
Hooley, Frank


Dixon, Donald
Howell, Rt Hon D.


Dobson, Frank
Howells, Geraint


Dormand, Jack
Huckfield, Les


Dubs, Alfred
Hughes, Robert (Aberdeen N)


Duffy, A. E. P.
Hughes, Roy (Newport)


Dunn, James A.
Janner, Hon Greville


Dunwoody, Hon Mrs G.
Jay, Rt Hon Douglas






John, Brynmor
Roberts, Albert (Normanton)


Johnson, James (Hull West)
Roberts, Ernest (Hackney N)


Johnson, Walter (Derby S)
Roberts, Gwilym (Cannock)


Johnston, Russell (Inverness)
Robertson, George


Jones, Rt Hon Alec (Rh'dda)
Robinson, G. (Coventry NW)


Jones, Barry (East Flint)
Rooker, J. W.


Jones, Dan (Burnley)
Roper, John


Kaufman, Rt Hon Gerald
Ross, Ernest (Dundee West)


Kerr, Russell
Rowlands, Ted


Kilroy-Silk, Robert
Ryman, John


Lambie, David
Sandelson, Neville


Leadbitter, Ted
Sever, John


Leighton, Ronald
Sheldon, Rt Hon R.


Lewis, Arthur (N'ham NW)
Shore, Rt Hon Peter


Lewis, Ron (Carlisle)
Short, Mrs Renée


Litherland, Robert
Silkin, Rt Hon J. (Deptford)


Lofthouse, Geoffrey
Silkin, Rt Hon S. C. (Dulwich)


Lyons, Edward (Bradf'd W)
Silverman, Julius


Mabon, Rt Hon Dr J. Dickson
Skinner, Dennis


McCartney, Hugh
Snape, Peter


McDonald, Dr Oonagh
Soley, Clive


McElhone, Frank
Spearing, Nigel


McKay, Allen (Penistone)
Spriggs, Leslie


McKelvey, William
Stainton, Keith


MacKenzie, Rt Hon Gregor
Stallard, A. W.


McMahon, Andrew
Stewart, Rt Hon D. (W Isles)


McNally, Thomas
Stoddart, David


McNamara, Kevin
Stott, Roger


McTaggart, Robert
Strang, Gavin


Magee, Bryan
Summerskill, Hon Dr Shirley


Marshall, D(G'gow S'ton)
Taylor, Mrs Ann (Bolton W)


Marshall, Dr Edmund (Goole)
Thomas, Jeffrey (Abertillery)


Marshall, Jim (Leicester S)
Thomas, Dr R.(Carmarthen)


Martin, M(G'gow S'burn)
Thorne, Stan (Preston South)


Mason, Rt Hon Roy
Tilley, John


Maxton, John
Tinn, James


Maynard, Miss Joan
Torney, Tom


Mellish, Rt Hon Robert
Urwin, Rt Hon Tom


Mitchell, Austin (Grimsby)
Varley, Rt Hon Eric G.


Mitchell, R. C. (Soton Itchen)
Wainwright, E.(Dearne V)


Morris, Rt Hon A. (W'shawe)
Wainwright, R.(Colne V)


Morris, Rt Hon C. (O'shaw)
Walker, Rt Hon H.(D'caster)


Morton, George
Watkins, David


Moyle, Rt Hon Roland
Welsh, Michael


Newens, Stanley
White, J. (G'gow Pollok)


Oakes, Rt Hon Gordon
Whitehead, Phillip


Ogden, Eric
Whitlock, William


O'Halloran, Michael
Wigley, Dafydd


O'Neill, Martin
Willey, Rt Hon Frederick


Orme, Rt Hon Stanley
Williams, Rt Hon A.(S'sea W)


Owen, Rt Hon Dr David
Wilson, Gordon (Dundee E)


Palmer, Arthur
Wilson, William (C'try SE)


Parker, John
Winnick, David


Pavitt, Laurie
Woodall, Alec


Pendry, Tom
Woolmer, Kenneth


Powell, Raymond (Ogmore)
Young, David (Bolton E)


Prescott, John



Price, C. (Lewisham W)
Tellers for the Noes:


Radice, Giles
Mr. Frank R. White and


Rees, Rt Hon M (Leeds S)
Mr. Donald Colman


Richardson, Jo

Question accordingly agreed to.

Clause read a Second time.

Amendment (a) proposed to the proposed clause, in subsection (2) at end insert:
'except so far as it applies to members of the family or the household of the person employed.'.—[Mr. Cook.]

Question put, That the amendment be made to the proposed clause:—

The House divided: Ayes 217, Noes 290.

Division No. 268]
[6.30 pm


AYES


Adams, Allen
Archer, Rt Hon Peter


Allaun, Frank
Ashley, Rt Hon Jack


Anderson, Donald
Ashton, Joe





Atkinson, N.(H'gey,)
Healey, Rt Hon Denis


Barnett, Guy (Greenwich)
Heffer, Eric S.


Bennett, Andrew(St'kp't N)
Hogg, N. (E Dunb't'nshire)


Bidwell, Sydney
Holland, S. (L'b'th, Vauxh'll)


Booth, Rt Hon Albert
Home Robertson, John


Boothroyd, Miss Betty
Homewood, William


Bottomley, Rt Hon A.(M'b'ro)
Hooley, Frank


Brown, Hugh D. (Provan)
Howell, Rt Hon D.


Brown, Ron (E'burgh, Leith)
Howells, Geraint


Callaghan, Rt Hon J.
Huckfield, Les


Callaghan, Jim (Midd't'n &amp; P)
Hughes, Robert (Aberdeen N)


Campbell-Savours, Dale
Hughes, Roy (Newport)


Canavan, Dennis
Janner, Hon Greville


Cant, R. B.
Jay, Rt Hon Douglas


Carter-Jones, Lewis
John, Brynmor


Clark, Dr David (S Shields)
Johnson, James (Hull West)


Cocks, Rt Hon M. (B'stol S)
Johnson, Walter (Derby S)


Cohen, Stanley
Johnston, Russell (Inverness)


Coleman, Donald
Jones, Rt Hon Alec (Rh'dda)


Concannon, Rt Hon J. D.
Jones, Barry (East Flint)


Conlan, Bernard
Jones, Dan (Burnley)


Cook, Robin F.
Kaufman, Rt Hon Gerald


Cowans, Harry
Kerr, Russell


Cox, T. (W'dsw'th, Toot'g)
Kilroy-Silk, Robert


Craigen, J. M.
Lambie, David


Crowther, J. S.
Leadbitter, Ted


Cryer, Bob
Leighton, Ronald


Cunningham, G. (Islington S)
Lewis, Arthur (N'ham NW)


Cunningham, Dr J. (W'h'n)
Lewis, Ron (Carlisle)


Dalyell, Tam
Litherland, Robert


Davidson, Arthur
Lofthouse, Geoffrey


Davies, Rt Hon Denzil (L'lli)
Lyons, Edward (Bradf'd W)


Davies, Ifor (Gower)
Mabon, Rt Hon Dr J. Dickson


Davis, Clinton (Hackney C)
McCartney, Hugh


Davis, T. (B'ham, Stechf'd)
McDonald, Dr Oonagh


Deakins, Eric
McElhone, Frank


Dempsey, James
McKay, Allen (Penistone)


Dewar, Donald
McKelvey, William


Dixon, Donald
MacKenzie, Rt Hon Gregor


Dobson, Frank
McMahon, Andrew


Dormand, Jack
McNally, Thomas


Dubs, Alfred
McNamara, Kevin


Duffy, A. E. P.
McTaggart, Robert


Dunn, James A.
Magee, Bryan


Dunwoody, Hon Mrs G.
Marshall, D(G'gow S'ton)


Eadie, Alex
Marshall, Dr Edmund (Goole)


Eastham, Ken
Marshall, Jim (Leicester S)


Edwards, R. (W'hampt'n S E)
Martin, M(G'gow S'burn)


Ellis, R. (NE D'bysh're)
Mason, Rt Hon Roy


Ellis, Tom (Wrexham)
Maxton, John


English, Michael
Maynard, Miss Joan


Ennals, Rt Hon David
Mellish, Rt Hon Robert


Evans, Ioan (Aberdare)
Mitchell, Austin (Grimsby)


Evans, John (Newton)
Mitchell, R. C. (Soton Itchen)


Ewing, Harry
Morris, Rt Hon A. (W'shawe)


Field, Frank
Morris, Rt Hon C. (O'shaw)


Fitch, Alan
Morton, George


Fletcher, Ted (Darlington)
Moyle, Rt Hon Roland


Foot, Rt Hon Michael
Newens, Stanley


Ford, Ben
Oakes, Rt Hon Gordon


Forrester, John
Ogden, Eric


Foster, Derek
O'Halloran, Michael


Foulkes, George
O'Neill, Martin


Fraser, J. (Lamb'th, N'w'd)
Orme, Rt Hon Stanley


Freeson, Rt Hon Reginald
Owen, Rt Hon Dr David


Freud, Clement
Palmer, Arthur


Garrett, John (Norwich S)
Parker, John


George, Bruce
Pavitt, Laurie


Gilbert, Rt Hon Dr John
Pendry, Tom


Ginsburg, David
Powell, Raymond (Ogmore)


Golding, John
Prescott, John


Graham, Ted
Price, C. (Lewisham W)


Grant, George (Morpeth)
Radice, Giles


Grant, John (Islington C)
Rees, Rt Hon M (Leeds S)


Grimond, Rt Hon J.
Richardson, Jo


Hardy, Peter
Roberts, Albert (Normanton)


Harrison, Rt Hon Walter
Roberts, Ernest (Hackney N)


Hart, Rt Hon Dame Judith
Roberts, Gwilym (Cannock)


Hattersley, Rt Hon Roy
Robertson, George


Haynes, Frank
Robinson, G. (Coventry NW)






Rooker, J. W.
Tilley, John


Roper, John
Tinn, James


Ross, Ernest (Dundee West)
Torney, Tom


Rowlands, Ted
Urwin, Rt Hon Tom


Ryman, John
Varley, Rt Hon Eric G.


Sandelson, Neville
Wainwright, E.(Dearne V)


Sever, John
Wainwright, H.(Colne V)


Sheldon, Rt Hon R.
Walker, Rt Hon H.(D'caster)


Shore, Rt Hon Peter
Watkins, David


Silkin, Rt Hon J. (Deptford)
Welsh, Michael


Silkin, Rt Hon S. C. (Dulwich)
White, Frank R.


Silverman, Julius
White, J. (G'gow Pollok)


Skinner, Dennis
Whitehead, Phillip


Snape, Peter
Whitlock, William


Soley, Clive
Wigley, Dafydd


Spearing, Nigel
Willey, Rt Hon Frederick


Spriggs, Leslie
Williams, Rt Hon A.(S'sea W)


Stallard, A. W.
Wilson, Gordon (Dundee E)


Stewart, Rt Hon D. (W Isles)
Wilson, William (C'try SE)


Stoddart, David
Winnick, David


Stott, Roger
Woodall, Alec


Strang, Gavin
Woolmer, Kenneth


Summerskill, Hon Dr Shirley
Young, David (Bolton E)


Taylor, Mrs Ann (Bolton W)



Thomas, Jeffrey (Abertillery)
Tellers for the Ayes:


Thomas, Dr R.(Carmarthen)
Mr. Joseph Dean and


Thorne, Stan (Preston South)
Mr. James Hamilton.




NOES


Adley, Robert
Chapman, Sydney


Aitken, Jonathan
Churchill, W. S.


Alexander, Richard
Clark, Sir W. (Croydon S)


Amery, Rt Hon Julian
Clarke, Kenneth (Rushcliffe)


Ancram, Michael
Clegg, Sir Walter


Arnold, Tom
Cockeram, Eric


Aspinwall, Jack
Colvin, Michael


Atkins, Rt Hon H.(S'thorne)
Cope, John


Atkins, Robert(Presfon N)
Cormack, Patrick


Atkinson, David (B'm'th,E)
Corrie, John


Baker, Kenneth(St.M'bone)
Cranborne, Viscount


Baker, Nicholas (N Dorset)
Critchley, Julian


Banks, Robert
Crouch, David


Beaumont-Dark, Anthony
Dean, Paul (North Somerset)


Bendall, Vivian
Dickens, Geoffrey


Bennett, Sir Frederic (T'bay)
Douglas-Hamilton, Lord J.


Benyon, Thomas (A'don)
du Cann, Rt Hon Edward


Benyon, W. (Buckingham)
Dunlop, John


Berry, Hon Anthony
Dunn, Robert (Dartford)


Best, Keith
Durant, Tony


Bevan, David Gilroy
Dykes, Hugh


Biffen, Rt Hon John
Eden, Rt Hon Sir John


Biggs-Davison, John
Edwards, Rt Hon N. (P'broke)


Blackburn, John
Eggar, Tim


Blaker, Peter
Emery, Peter


Body, Richard
Eyre, Reginald


Bonsor, Sir Nicholas
Fairgrieve, Russell


Boscawen, Hon Robert
Faith, Mrs Sheila


Bottomley, Peier (W'wich W)
Farr, John


Bowden, Andrew
Fell, Anthony


Boyson, Dr Rhodes
Fenner, Mrs Peggy


Braine, Sir Bernard
Finsberg, Geoffrey


Bright, Graham
Fisher, Sir Nigel


Brinton, Tim
Fletcher, A. (Ed'nb'gh N)


Brittan, Leon
Fletcher-Cooke, Sir Charles


Brooke, Hon Peter
Fookes, Miss Janet


Brotherton, Michael
Forman, Nigel


Brown, Michael (Brigg &amp; Sc'n)
Fowler, Rt Hon Norman


Browne, John (Winchester)
Fox, Marcus


Bruce-Gardyne, John
Fraser, Rt Hon Sir Hugh


Bryan, Sir Paul
Fraser, Peter (South Angus)


Buchanan-Smith, Alick
Gardiner, George (Reigate)


Buck, Antony
Gardner, Edward (S Fylde)


Bulmer, Esmond
Garel-Jones, Tristan


Burden, Sir Frederick
Glyn, Dr Alan


Butcher, John
Goodhart, Philip


Butler, Hon Adam
Goodlad, Alastair


Cadbury, Jocelyn
Gorst, John


Carlisle, John (Luton West)
Gow, Ian


Carlisle, Kenneth (Lincoln)
Gower, Sir Raymond


Chalker, Mrs. Lynda
Grant, Anthony (Harrow C)





Gray, Hamish
Moore, John


Greenway, Harry
Morgan, Geraint


Grieve, Percy
Morris, M. (N'hampton S)


Grist, Ian
Morrison, Hon C. (Devizes)


Grylls, Michael
Morrison, Hon P. (Chester)


Gummer, John Selwyn
Mudd, David


Hamilton, Hon A.
Murphy, Christopher


Hamilton, Michael (Salisbury)
Myles, David


Hampson, Dr Keith
Neale, Gerrard


Hannam,John
Needham, Richard


Haselhurst, Alan
Neubert, Michael


Hastings, Stephen
Newton, Tony


Hayhoe, Barney
Normanton, Tom


Heddle, John
Nott, Rt Hon John


Henderson, Barry
Onslow, Cranley


Hicks, Robert
Oppenheim, Rt Hon Mrs S.


Higgins, Rt Hon Terence L.
Page, John (Harrow, West)


Hogg, Hon Douglas (Gr'th'm)
Page, Rt Hon Sir G. (Crosby)


Holland, Philip (Carlton)
Page, Richard (SW Herts)


Hooson, Tom
Parkinson, Cecil


Howell, Rt Hon D. (G'ldf'd)
Parris, Matthew


Howell, Ralph (N Norfolk)
Patten, Christopher (Bath)


Hunt, David (Wirral)
Patten, John (Oxford)


Hunt, John (Ravensbourne)
Pattie, Geoffrey


Hurd, Hon Douglas
Pawsey, James


Irving, Charles (Cheltenham)
Peyton, Rt Hon John


Jenkin, Rt Hon Patrick
Pink, R. Bonner


Jessel, Toby
Pollock, Alexander


Johnson Smith, Geoffrey
Powell, Rt Hon J.E. (S Down)


Jopling, Rt Hon Michael
Prentice, Rt Hon Reg


Joseph, Rt Hon Sir Keith
Price, Sir David (Eastleigh)


Kaberry, Sir Donald
Prior, Rt Hon James


Kellett-Bowman, Mrs Elaine
Proctor, K. Harvey


Kershaw, Anthony
Pym, Rt Hon Francis


Kimball, Marcus
Raison, Timothy


King, Rt Hon Tom
Rathbone, Tim


Kitson, Sir Timothy
Rees, Peter (Dover and Deal)


Knight, Mrs Jill
Renton, Tim


Knox, David
Rhodes James, Robert


Lamont, Norman
Rhys Williams, Sir Brandon


Lang, Ian
Ridley, Hon Nicholas


Langford-Holt, Sir John
Ridsdale, Sir Julian


Latham, Michael
Rifkind, Malcolm


Lawson, Rt Hon Nigel
Roberts, M. (Cardiff NW)


Lee, John
Roberts, Wyn (Conway)


Lennox-Boyd, Hon Mark
Rossi, Hugh


Lester, Jim (Beeston)
Rost, Peter


Lewis, Kenneth (Rutland)
Sainsbury, Hon Timothy


Lloyd, Ian (Havant &amp; W'loo)
St. John-Stevas, Rt Hon N.


Lloyd, Peter (Fareham)
Scott, Nicholas


Loveridge, John
Shaw, Giles (Pudsey)


Luce, Richard
Shelton, William (Streatham)


Lyell, Nicholas
Shepherd, Colin (Hereford)


Macfarlane, Neil
Shepherd, Richard


MacGregor, John
Shersby, Michael


MacKay, John (Argyll)
Silvester, Fred


Macmillan, Rt Hon M.
Skeet, T. H. H.


McNair-Wilson, M. (N'bury)
Speed, Keith


McNair-Wilson, P. (New F'st)
Speller, Tony


McQuarrie, Albert
Spence, John


Madel, David
Spicer, Jim (West Dorset)


Major, John
Spicer, Michael (S Worcs)


Marland, Paul
Sproat, Iain


Marlow, Tony
Squire, Robin


Marshall, Michael (Arundel)
Stainton, Keith


Marten, Neil (Banbury)
Stanbrook, Ivor


Mates, Michael
Stanley, John


Maude, Rt Hon Sir Angus
Steen, Anthony


Mawby, Ray
Stevens, Martin


Mawhinney, Dr Brian
Stewart, Ian (Hitchin)


Maxwell-Hyslop, Robin
Stewart, A.(E Renfrewshire)


Mayhew, Patrick
Stokes, John


Mellor, David
Stradling Thomas, J.


Miller, Hal (B'grove)
Tapsell, Peter


Mills, Iain (Meriden)
Taylor, Teddy (S'end E)


Mills, Peter (West Devon)
Tebbit, Norman


Miscampbell, Norman
Temple-Morris, Peter


Moate, Roger
Thomas, Rt Hon Peter


Monro, Hector
Thompson, Donald


Montgomery, Fergus
Thorne, Neil (Ilford South)






Thornton, Malcolm
Wells, John (Maidstone)


Townend, John (Bridlington)
Wells, Bowen


Townsend, Cyril D, (B'heath)
Wheeler, John


Trippier, David
Whitelaw, Rt Hon William


Trotter, Neville
Whitney, Raymond


van Straubenzee, W. R.
Wickenden, Keith


Vaughan, Dr Gerard
Williams, D.(Montgomery)


Viggers, Peter
Winterton, Nicholas


Waddington, David
Wolfson, Mark


Wakeham, John
Young, Sir George (Acton)


Waldegrave, Hon William
Younger, Rt Hon George


Walker, B. (Perth)



Wall, Patrick
Tellers for the Noes:


Walters, Dennis
Mr. Spencer Le Marchant and


Warren, Kenneth
Mr. Carol Mather.


Watson, John

Question accordingly negatived.

Clause added to the Bill.

New Clause 37

EXEMPTION FROM INTEREST ON OVERDUE TAX WHERE SUMS DUE TO THE TAXPAYER ARE DELAYED BY CIVIL SERVICE INDUSTRIAL ACTION

'(1) Where an amount due to a person from a Government department in connection with a business carried on by him remains unpaid for any period as a result of industrial action taken by civil servants after 8th March 1981 and that person withholds any tax—

(a) which became due and payable by him after that date and before 6th April 1982; and
(b) on which interest would, apart from this section, be chargeable under section 86 or 87 of the Taxes Management Act 1970,
he may, for that period and for seven days after the end of it, claim exemption from interest under those sections on a corresponding amount of that tax less any reduction under subsection (2) below.

(2) Where for the whole or any part of the period mentioned in subsection (1) above the person in question withholds any amount for which he is accountable to the collector after the said 8th March—
(a) in respect of income tax which he was liable to deduct in pursuance of section 204 of the Taxes Act (pay as you earn); or
(b) in respect of Class 1 contributions under the Social Security Act 1975 or the Social Security (Northern Ireland) Act 1975,
the amount of tax in respect of which exemption may be claimed under that subsection for that period or that part of it shall be reduced by the amount withheld by him as aforesaid.

(3) The reference in subsection (1) above to an amount due to a person from a Government department in connection with a business carried on by him is to any value-added tax due to him from the Commissioners of Customs and Excise, to any grant or subsidy due to him from any other Government department in respect of such a business and to any sum due to him from a Government department under a contract entered into by him in the course of a business; and for the purposes of this subsection "business" includes any trade, profession or vocation.

(4) Any claim under this section shall be made to the Board.'.—[Mr. Peter Rees.]

Brought up, and read the First time.

Mr. Peter Rees: I beg to move, That the clause be read a Second time.
I make no secret of the fact that the Government are concerned about the inability of the Customs and Excise, due to industrial action, to make repayments of VAT. We are aware of the impact that this has on the cash flow of a wide range of businesses and firms. There are about 1,300,000 registered traders, and of those perhaps 400,000 are repayment traders.
We have considered long and hard how we could make those repayments of VAT, and have come reluctantly to the conclusion that because the whole system is computerised it would be impossible to do it manually. We have given great and anxious thought to the question.
In an endeavour to mitigate the impact of the action, we announced some months ago that a taxpayer who is owed a VAT repayment may, by agreement with the collector of taxes, offset his liability for PAYE. That seemed to us to be a fair and equitable arrangement. But an essential element is that VAT carries no interest either way. If a registered trader is in arrears with his VAT, he pays no interest, even though he may be subject to penalty proceedings. Conversely, if the Customs and Excise is in arrears with VAT repayments, no interest is payable on those sums. That contrasts with the Inland Revenue position, which, for historic and various other reasons, is different. Similarly, PAYE does not attract interest, even though it is delayed in payment.
We have endeavoured to extend this kind of offsetting arrangement. Indeed, taxpayers who were owed sums of VAT have been permitted to offset income tax, corporation tax or capital gains tax which they owed, up to the same amount. But in that case the difficulty is that the Inland Revenue is not, by statute, empowered to waive the interest on the tax that may be delayed, even though there may be very good reasons for the delay. There is no administrative tolerance that could properly be invoked in this kind of situation.
We feel, therefore, that the matter should be put right, and that the new clause will go some way towards mitigating the inconvenience, not to say positive hardship, that has been occasioned to businesses by the failure to make VAT repayments. The new clause is designed to ensure that where tax is deferred, whether it be income tax, corporation tax or capital gains tax, in order to offset a repayment of VAT which is due in connection with a business, and the delay is due to the industrial action of the Civil Service, interest on that tax should be waived.

Mr. Maxton: The Minister says that the interest will be waived for those who are not paying tax at present because of the industrial dispute. What about those who are not receiving their benefits because of the industrial dispute? I refer to those in receipt of teachers' pensions, and so on. Will the Government introduce legislation in order to pay those people interest on the sums of money that are outstanding to them?

Mr. Rees: The Government are equally concerned with that problem, but that is not the responsibility of the Customs and Excise. It is the responsibility of the Paymaster General's Department, which is located principally in Sussex. The hon. Member for Glasgow, Cathcart (Mr. Maxton) made a perfectly valid point. I am sure that he and many other hon. Members have received information about constituency cases, as I have, and are well aware that there is acute concern on the part of those whose pensions may be deferred or delayed because of industrial action. But this matter is not within the purview of the Treasury.
The point is well made, and my right hon. Friend the Lord President of the Council has, I believe, set in hand measures which will, I hope, enable these pensions to be paid through the banks. But the point raised by the hon.


Gentleman is not the precise one at which the new clause is aimed. I do not dispute for a moment the validity of his point. If he cared to direct a question to my right hon. Friend the Lord President of the Council, I hope that he would receive an answer that would satisfy him.
The point is well within the Government's knowledge, but the new clause, I regret to say, cannot be directed precisely at the point made by the hon. Gentleman, because it is directed to empowering the Inland Revenue to waive interest. It is not to empower the Revenue or the Customs and Excise to pay interest. I do not think that it would be within the ambit of a Finance Bill to seek to enable the Government to pay interest on pensions that are delayed.

Mr. Robert Sheldon: My hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton) has raised a good point, because it may be that the taxpayer is being charged interest on outstanding tax at the same time as he is awaiting a pension that is delayed due to some industrial action. Will the Minister consider that aspect of the problem?

Mr. Rees: I shall consider it. It is theoretically possible but, after all, most of the people who will be concerned with the kind of problem that the hon. Member for Cathcart has raised will probably be pensioners who will be subject to PAYE, so it is not quite the same point. It is a point of slightly narrower scope, because we are particularly concerned with the damage done to the cash flow of various businesses, particularly small businesses, by the inability of the Customs and Excise, due to the industrial action, to make repayments of VAT.
The new clause may not have as wide a scope as the whole House would like, but I hope that the House will feel that it is a modest measure which will go some way to ameliorate the present difficulty.

Mr. Foulkes: The new clause deals only with the Civil Service industrial action, and I can understand why the Government are preoccupied with that at the moment. But have they given thought to other forms of industrial action which might have a similar kind of effect, such as industrial action by Post Office workers?
Did the Government think of that possibility when drafting what is a fairly narrow clause, covering only the Civil Service industrial dispute?

Mr. Rees: The hon. Gentleman would be within his rights in suggesting that the Government should consider that kind of problem. The hon. Gentleman may be envisaging an interruption of repayments due to secondary action of some kind. I think that that goes rather wider than the clause. I hope that what the hon. Gentleman envisages is a little hypothetical. If and when it arises, I have no doubt that the Government will urgently consider the kind of response that they should make. However, that situation is not one which fortunately the country or the Government face now.
I think that the acuteness of this problem is that the Government appear to be asking with one hand whilst failing in their duty to pay with another. That, I think, is the unattractiveness of the present situation. The Government are acutely aware of the impact of the industrial action on registered traders. We are endeavouring to mitigate the problem. I do not think that we should endeavour to broaden the clause to cover any hypothetical

situation which might arise and prevent a Government Department from making repayment of VAT or some other sum.
Although our consideration of this problem started with the consideration of the repayments of VAT, the new clause covers, as the House will see, any amounts
due to a person from a Government Department in connection with a business carried on by him.
It therefore goes wider than repayments of VAT. I hope however, that we need not consider, either at present or during the lifetime of the Government, the hypothetical situation which the hon. Member for South Ayrshire (Mr. Foulkes), with his customary imagination and acumen, has raised today.

Mr. Paul Dean: Will my hon. and learned Friend make clear the position of the self-employed? Do I understand from the welcome new clause that those liable to schedule D—the self-employed—will be covered by the provision?
Secondly, are the Government contemplating any compensation for people who may suffer cash flow problems, or difficulties through the non-receipt of money that they would otherwise be usefully employing, as a result of VAT repayments not being made?

Mr. Rees: I am happy to give an assurance on the first point. The clause certainly covers the self-employed. It is not limited to bodies corporate.
On the second point, I regret that we have not devised a scheme of compensation. VAT has never attracted interest in either direction. No interest is charged on arrears of VAT, and similarly no interest has ever been paid on overdue repayments. That would considerably enlarge the scope of the provision. I can see the case that my hon. Friend would wish to make at greater length were he not sensitive to the pressures on the time of the House.
This is a modest measure, to ameliorate some of the damage that has been done. I do not put it any higher than that. I hope that on that basis it will be accepted by the House.

Mr. J. Grimond: I regret that the Government have not included interest in the new clause. I have long felt that the behaviour of the Inland Revenue in regard to these matters is unfair. It charges interest on money due to it but resolutely refuses to pay interest on money due to the taxpayer, even though the fault may lie with the Revenue.
However, the immediate difficulty arises over the strike by civil servants. I appreciate not only that, but what the Minister said about how concerned the Government are over the matter. I do not think that that relieves Members of Parliament from the duty of pressing the Government again, since we are certainly being heavily pressed—at least, I am—by our constituents.
One firm in my constituency, LHD—largely shipping brokers and managers—is in great difficulties. I sent particulars to the Chief Secretary, since he replied to questions on the matter some time ago. However, that is only one of many firms affected all over the country, as the Government well know.
Inasmuch as the new clause offers some help, it is certainly welcome. We appreciate that the Government are trying to help these firms by allowing them to set off against taxation what is due to them. However, I must tell the Government that this will not get those firms out of


their difficulties. I do not see how it will improve their cash flow, which is the main thing. I will not waste the time of the House by going over the arguments, which have been rehearsed before, but I hope that the Government will, possibly in a different context or in a different Bill, not only take up some of the points made on both sides of the House already but consider what further help can be given to small firms if the strike continues.
The Government are attempting to keep small firms in business and to encourage them to expand by helping them. However, many of them are finding that the damage done by this strike is far more serious than can be redeemed by any help that is offered to them.
Therefore, while I welcome the new clause, I trust that the Government will reconsider the whole matter. Does the Minister think that this provision will be of substantial help to firms which are in difficulties over their cash flow?

Mr. K. J. Woolmer: I declare an interest as the parliamentary adviser to the Inland Revenue Staff Federation. As with the right hon. Member for Orkney and Shetland (Mr. Grimond), I acknowledge the problems that are being caused by the dispute for many of those involved in the economy who previously, perhaps, had gone along with the often wild and exaggerated view that the Civil Service provides no substantial service in reality and can be ignored until its services are called upon.
Why have the Government got themselves into such a position on this matter that they have had to bring forward this new clause? As I understand the position, the trade unions involved offered to process the VAT repayments manually. The House is owed an explanation from the Ministers, who are, after all, responsible for this area of service, as to why that offer has not been taken up more vigorously.
How much in VAT repayments is currently being repaid? What proportion is that of the normal repayment flow that could be expected? What positive and active steps are being taken to ensure that VAT repayments are being processed manually?
This is an important matter for the House. Although it is always useful to have a legislative way of overcoming the interest problem that would otherwise occur, what is even more important in this situation is to resolve the effects of the dispute as far as possible.
The new clause arises because VAT repayments are not being made. It goes beyond that to a number of other general considerations. I do not wish to go into all the ramifications, but I suggest to Ministers concerned that in terms of Inland Revenue staff they are in the position of the employer and they are having to come to the House this evening because the Inland Revenue has been allowed to get into the worst state of industrial relations and dispute with the Government, as the employer, in our history. In asking the House to change legislation in order to ameliorate some of the effects of the dispute I would have hoped that the Minister would at least have given us his views on the dispute, and his own views, as the employer, on its effects.
Is any assessment being made, by way of a review, of the effects and consequences of the current industrial action on the organisation and efficiency of the Inland Revenue service?
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It is possible that we have yet to see the effects of a whole series of problems in the Inland Revenue service. There are the problems for VAT traders and also the substantial interest charges that are accumulating as a result of additional Government borrowing because the dispute has not been settled. I understand that this additional borrowing now amounts to over £80 million, almost the equivalent of 2 per cent. on the pay bill.
This is not the time, when negotiations are proceeding on delicate matters, to say anything that would make attempts to resolve the dispute more difficult. However, the Minister has lost an opportunity to explain the effects of the dispute on the Inland Revenue and the service that it should be providing to those involved within it as recipients or as taxpayers.
I should like to know what further problems lie in store as a result of this dispute. How much tax will not be collected? It was noticeable that the Minister, in his brief introduction, did not put any figures upon the problem. Hon. Members should know what sums are involved in terms of VAT repayments not being made and taxes not collected and the amount of interest that will be waived as a result of the new clause.
This seems not merely a reasonable but a necessary question. On a number of clauses in Committee, Ministers often did not provide figures unless pressed. One would have thought that the obvious procedure in putting before the House a Bill that involves millions of pounds would be for the Minister to say, "This is what we want the House to approve. This is what it will cost. You can form an assessment whether it is worth while."
I hope, therefore, that the Minister will give the figures involved in VAT not being repaid, the taxes that have not been collected and the estimate of the amount of interest being waived. Hon. Members on both sides have pointed out the problems facing people as a result of this industrial action. Many people will be assessing the sums being provided to overcome the problems for a particular group. I do not quarrel with the measure, but it seems that many of our businesses have come to a sorry state when a dispute in this area apparently threatens to bring them to their knees. It implies that their level of profitability and liquidity and the ability of the banking system to meet their requirements needs to be spelt out.
The amount not being collected and the cost that this imposes goes beyond the measure that we are discussing. While it would not be in order to have a wide-ranging consideration of all these issues, there is an opportunity for the Minister to inform the House of his latest estimates of the amount of revenue not collected and what this means in terms of additional interest on borrowings that have to occur. At the end of the day, this substantial sum of money will presumably have to be borne by someone. It may be the taxpayer, or the Government may attempt to recoup it by some other means.
Only a week or two ago the Chancellor of the Exchequer found himself involved in the need to produce a mini-Budget dealing with cigarettes for a sum of money less than the Government are having to pay out in additional interest charges. This has happened to a Government that attempted to say that the Civil Service dispute was not a serious matter for the public, that it could be simply sat out, and that it would go away. It has become crystal clear that it will not go away.
It is a matter of deep regret that the Finance Bill, which can be implemented only by the good will and ready co-operation that has always traditionally been provided by Inland Revenue staff, is being considered in such an appalling industrial relations climate. How can the Chancellor of the Exchequer and his Ministers have allowed the Inland Revenue service to get into such an appalling industrial relations state? That is the situation. I have never attempted in the House in the last few months to stir up or to exaggerate the problem, but it is undoubtedly true that the Inland Revenue service, a traditionally extremely moderate trade union, is in a most appalling industrial relations situation.
Many further matters lie below the surface and are threatened as a consequence of this industrial action. The cost has yet to be counted. I hope that the Minister will be able to give his assessment on some of these important matters. For example, the computerisation of schedule D was due to commence in August. I assume that it is not going ahead on time. I assume that it has been put back. The result in the service will be an inefficiency that this House has wanted to overcome. I hope that the Minister will be able to say whether he has instituted any review of the effects and consequences of the industrial action on the organisation and efficiency of the service.
The whole dispute has been a tragic mishandling of industrial relations by the Government. The dispute has had effects far more serious than hon. Members on either side of the House really believed would occur. I hope that the Minister will be able to put a price on the cost. It is also possibly no more than a hope that Ministers responsible for the Inland Revenue service are doing all that they can to ensure that the true feeling within the Inland Revenue service is communicated to other Ministers and even to the Prime Minister, who thought that the Government could simply trample over the civil servants. This is a matter of deep regret and the House has still to count the cost.
I hope that the Minister will give me some figures and comment on the position, as he sees it, regarding the Inland Revenue service. Conservative Members, as always, prefer to take a one-sided view of industrial relations, but even they must be appalled at the effects of this dispute upon the Inland Revenue service.
It would greatly assist the establishment of the good industrial relations that we all desire if Conservative Members would on occasion ensure that both they and the public recognise the service that those workers provide. I hope that the Minister will be able to respond to the detail of my questions and say something to enable the employees for whom he is responsible to feel that their work is recognised and that he at least is trying to do what he can to ensure that the merit of their case obtains some recognition.

Mr. Campbell-Savours: My hon. Friend the Member for Batley and Morley (Mr. Woohner) has effectively put the case that many civil servants would have wished to put themselves, had they had the opportunity.
This measure falls within a group of other measures that my hon. Friends and Conservative Members have been asked to approve during the past 12 months. I group it with the measure that we dealt with late one night to deal with the industrial dispute by prison officers. It is part of the

tinkering arrangements that the Government have had to introduce to try to offset the difficulties that have arisen as a result of poor industrial relations.
This will not be the last such measure. We shall see more measures of this nature over the next few years which attempt to remove the difficulties that result from industrial action and cushion those people who are suffering, for perfectly understandable reasons, from the effects of those industrial actions. However, that is not the way to resolve the problem. The real way is to come to terms with the problems in a practical manner. That is where the Prime Minister repeatedly fails.
I want to raise a matter which directly relates to the new clause, but which is of great concern to many thousands of business people outside the House—the question of VAT payments at the end of this industrial dispute. Some people have a certain amount of money that they can offset against their VAT liability, but many people are not in that fortunate position.
A few minutes ago I spoke to a small company in my constituency which has had difficulties and is to close tomorrow. Its problems arise in part from its VAT account. Of course, I do not expect flexibility from the Government in that respect, because when a liability arises it should be paid. However, for many small companies over the past few months the VAT money that they have not paid to the Treasury has been a particularly useful additional resource in their cash flow. The companies may have been wrong to use that money as part of their cash provision, because the money was not theirs by entitlement. It belonged to the Revenue. However, that is what they have done.
I have asked a number of parliamentary questions about VAT liability which companies may find difficulty in meeting at the end of the industrial dispute, and I want to know what action the Minister of State will take to insulate the country against the many bankruptcies that may occur.
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I do not make a habit of making predictions in the House, but on this occasion I predict that at the end of the dispute many small companies will panic. As the civil servants get back to work and begin to bear down on them to pay the liabilities that they have attracted over the preceding months, they will find that they do not have the money.
Perhaps the Minister will show a little more flexibility, because many of the companies do not have the money to pay their liabilities. The money may be tied up in stocks or be owed by debtors. Certainly, it will not be available for many companies, and I hope that the Minister understands the serious problem that is involved. When the industrial dispute ends—assuming that it will not continue into the next Session of Parliament—hon. Members will table questions to measure the Government's sensitivity to this worrying problem.

Mr. Foulkes: I admire the facility and expertise of the Treasury Ministers. Almost all of them are lawyers and they make a convincing case, in spite of the fact that it is often an almost impossible one.
Before the last election we were told that the present Government would introduce very little legislation. We were also told that we should not have the sort of instant legislation and instant reaction of some previous Governments. Yet we have had possibly two of the heaviest Sessions of legislation for a long time, and in the


past few days we have had perfect examples of instant reaction, instant legislation. We have heard the Home Secretary, although he does not have the courage to make a statement in the House—he does it behind the scenes to a group of Tory Back Benchers—talking about the reaction—

Mr. Deputy Speaker (Mr. Bernard Weatherill): Order. That has nothing to do with the Finance Bill.

Mr. Foulkes: It is a comparison. It is typical of the things that the Government are doing. The same is true of this Finance Bill. Now we have this instant legislation to deal with problems which were created by the Government and which they could have avoided if they had honourably carried out the commitment that was given to civil servants that their pay would be brought into line with the pay of people working outside the Civil Service. The Government did not honour that commitment, and as a result they have to introduce this kind of legislation.
It was clear from the response to the question that I put to the Minister that he had not considered the possibility of any other disputes. It was clear that he was responding just to this dispute, responding to the problems of the moment and to the instant anxiety which now bears down on the Government. We understand that preoccupation. We understand the fact that they are caught up with the immediate problems. However, that is not the basis of good legislation. Time and again I have seen from the outside—and, in the past two years, from the inside—that the poorest legislation, the legislation that is found wanting soon after it is enacted, is that which is brought in in response to a problem and in an attempt to solve that problem.
My hon. Friend the Member for Batley and Morely (Mr. Woolmer) said that the economy must be in a pretty parlous state if so many businesses need such help. I am not against the help. Businesses need it to enable them to hobble and struggle on through the economic difficulties.
When driving the other day I heard on my radio that the Government's previous record for company liquidations had been broken. This Government are more successful at breaking their own records than Sebastian Coe. That is another high achieved by the Government. We can understand why they need to squeeze the legislation through to try to provide some meagre help for companies that are suffering so much from the other effects of the Government's economic policies.
The Government's intransigence and unwillingness to honour commitments has resulted in the Government falling into this pit. They have achieved the unique distinction of uniting the eight Civil Service unions in action. They are unions with a tradition of moderation. They have a tradition of not wanting to take militant action. However, the Government have succeeded in uniting them in opposition to their policies.
The unions understandably feel aggrieved because the Government have not honoured their pledges. That is why they are so unwilling to accept the word of the Lord President of the Council, who has offered to set up a committee to examine Civil Service pay. That does not solve the immediate problem, nor does it give the Civil Servants anything now. The unions are reluctant to accept the good faith of a Government who have already broken faith with them on pay.
We are discussing instant legislation to solve an immediate problem. I asked the Minister what might happen if there were further industrial disputes. The Minister did not reply. If the Government continue kicking unions in the teeth and slapping down employees who have traditionally been moderate they will cause more disputes in their lifetime, however long that may be. I hope that it is not too long.
I wonder what other legislation will be introduced. The Minister says that there might be legislation if there were a postal dispute, for example. Then we might not have the convenience of the Report stage of a Finance Bill in which to slip a convenient amendment. We might be put to the trouble of dealing with special Bills to deal with particular problems.
A number of other problems caused by the current Civil Service action are not dealt with—

Mr. Deputy Speaker: Order. That is an interesting preamble but I hope that the hon. Gentleman will come to deal with overdue tax and sums which are delayed by the industrial action, instead of generalities.

Mr. Foulkes: I was about to bring my remarks to a conclusion. I was trying to explain, without going into specific details, that such legislation is bad. The Government could legislate for other circumstances caused by the industrial dispute but they have declined to do so. As my hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton) said, the Government are not willing to legislate to help people who are losing their benefits because of the dispute. The amendment provides a special privilege for small business men. I am not against that—as my hon. Friend the Member for Batley and Morley said, in the present dire economic circumstances caused by the Government's policies, they need it—but, many other groups and individuals also need help.
I hope that the Minister will consider the possibility of other disputes arising and causing similar hardship which the legislation does not cover. I hope that he will also consider the plight of others who are affected by the current dispute but who are not helped by the amendment.

Mr. John Farr: I welcome new clause 37 and particularly the back-dating of its provisions to 8 March this year. I have been in correspondence with the Chancellor of the Exchequer about a number of issues in this connection. Many cases of hardship occur as a result of the civil servant's industrial action and they are multiplying almost every day. A tragic example that I heard of the other day is that attendance allowance books are not being posted to some of my disabled constituents because of pickets who are preventing the posting of the books. We must hope for an early end to the industrial action.
In the meantime, the Government are right to introduce the new clause. Pharmacists are also seriously affected and are in severe financial difficulties. Many pharmacists are owed tens of thousands of pounds in VAT repayments. Such small business men will go under unless a sensible solution is found.
Other categories and individuals are also suffering. For instance, a double glazing contractor came to see me last Saturday. He calculated that he was owed about £3,000 in VAT repayments, which he has no chance of receiving at present. The Government's solution in new clause 37 is admirable if the amount of VAT repayments are about in


balance with any tax money that is due. That is not always so. In many cases the VAT repayments due greatly exceed the amount of tax due to the Exchequer.
I cannot help thinking that in some respects new clause 37 is a rather rough and ready solution to a sophisticated problem. In agriculture, for instance, a farmer might be engaged in business. He might owe a little money in taxation but be owed a four-figure sum in VAT repayments. The solution proposed in new clause 37 will not help him.
I welcome the new clause. It is better than nothing. I hope that my hon. and learned Friend will say whether he has considered the alternative of maintaining the 12½ per cent. interest due on overdue taxes but simultaneously, as from 8 March, chalking up as credit the 12½ per cent. on VAT repayments due. In that way a large number of people who will not be helped tremendously by the clause will be more greatly helped. I shall be grateful if my hon. and learned Friend can address himself to that point when he speaks.

Mr. Robert Sheldon: We welcome the principle that lies behind the new clause, but we must question the way in which it was introduced and we must consider the other ways in which such provisions might have been made.
The new clause deals with two forms of taxes that can be waived for the time being because of the failure of the Government to make payments due to the taxpayer. Those are income tax under pay-as-you-earn and class 1 contributions. If a taxpayer owes that money, he can withhold payment of it if there is due to him some VAT or a grant or subsidy.
My hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton) asked why that could not apply to a person receiving a public service pension or a retirement pension, who receives it late and loses the interest on it. That was a good question. The answer that the Minister of State gave was that that did not apply, but he did not go into the question why the new clause was not more broadly set out to cover such matters.
It will be within the Minister's recollection and that of the House that a number of years ago there was a national savings dispute under which interest was delayed. Because of it legislation came through the House to ensure that the people concerned, having received promises of payment by the Government, would not be inconvenienced as a result of the late payment of interest. Therefore, their interest was brought up. That is the path that the Minister of State could have gone along in precisely that way, but he did not choose to do so. The first question which we must ask is why he did not make the new clause more widely drawn to cover those aspects as well. He would have been following previous legislation designed to meet problems such as the ones which now arise.
The next question covers the matter about VAT or any grant or subsidy due to a person. I am not sure whether the Minister has covered all the various payments by the Government which might be made to the taxpayer. Even if he has, the hon. Member for Harborough (Mr. Farr) mentioned those people who had no tax owed by them, who would never be able to benefit. That is a valid point that follows from the one that I made at the outset. Those people should be offered an interest charge of an approximate amount. I know that such things cannot be settled accurately, but it was done before. If the strike goes

on much longer we shall be dealing with substantial sums and people will be failing to receive repayments. The effect on their cash flow will not be assisted by a number of measures in the Bill. The hon. and learned Member might say that that does not apply to many people. I grant that, but it will apply to some. It is an injustice to some and on previous occasions it was remedied.
The Minister of State set out the cash flow problems that business men and farmers have. Out of the 1·3 million VAT-registered traders, 400,000—or roughly one-third—are repayment traders. Those taxpayers are owed their VAT repayment. The hon. and learned Gentleman should be a little more forthcoming about what conditions there might be when the inspector of taxes does not so agree. If he agrees, the pay-as-you-earn will be a way in which he will not have to pay interest on payments of income tax and corporation tax.
As the hon. and learned Gentleman rightly mentioned, pay-as-you-earn carries no interest charges. Of course, we are in real difficulty here because we are offsetting one payment against another. One payment comes under Customs and Excise and the other comes under Inland Revenue. The House will be aware that the rules are not the same under Customs and Excise as under Inland Revenue. Those are two revenue departments that grew up separately, with their different rules and forms of discretion. Therefore, typically, Customs and Excise has greater authority arising from its old Customs activities, when it had power to seize goods and march into all sorts of premises. The Inland Revenue, which came on the scene later, in more civilised times, has to obtain powers of warrant, and so on. Therefore, the rules are different.
I know that a number of people have looked for eventual unification of those two bodies of the Revenue and are hoping for an eventual amalgamation. That may come. We must think in terms of loyalties to the service and traditions, which are of importance in these matters. However, that is not for us to consider. What we must consider is how we operate when those bodies have different rules and different requirements, and we are asking them to intermix their relations based on their different requirements. It will be necessary for the Minister of State to assure the House that, where one rule is waived for one of the revenue departments, corresponding action will be taken by the other, even though that is not normally the case at present.
The Minister mentioned the question of discretion. We know that Customs and Excise has greater powers of discretion than the Inland Revenue. It is able to waive the laws much more readily than he Inland Revenue. I hope that the hon. and learned Gentleman will show how the Customs and Excise will waive its discretion to the maximum and how that will fit in with the problems of the Inland Revenue.
The most important thing with which we are concerned is the reason for the new clause, as my hon. Friend the Member for Batley and Morley (Mr. Woolmer) said in an important intervention and as was said by my hon. Friend the Member for Workington (Mr. Campbell-Savours). That concerns the cost of the dispute and the reason for it. In that respect, the first question that I should like to ask is: what is the current estimate of the amount of tax outstanding? I should like to follow my hon. Friend the Member for Batley and Morley in asking for a breakdown of the figures.
It is extraordinarily difficult to obtain such figures, which are of great importance in understanding the way in which the Government machine is not operating in the way in which we always took it for granted it would. The figures for the amounts have been £4 billion to £5 billion of revenue outstanding as a result of the dispute, and up to now the interest charges total about £80 million. I should like the Minister of State to bring those figures up to date and to give us the breakdown between income tax, VAT, pay-as-you-earn, corporation tax and capital gains tax.
There are some firms—not necessarily many—which, as a result of their failure to pay over their pay-as-you-earn and some of the other taxes, to quote someone whom I talked to at the weekend
are almost awash with money.
That is because of their failure to pay the taxation which they would have otherwise paid. I should like the Minister to comment on that aspect.
The most important thing is the way in which a settlement has to be made at some stage, and the earlier the better. Unquestionably there has been a great mishandling of the whole situation which largely comes from the impression given that here are a Government who do not like the Civil Service. On a number of occasions they seem to go out of their way to make that clear. Those who are attuned to understanding those signals—no one is better attuned than the Civil Service—know full well that when a Government do not give their normal commendations that are almost obligatory and customary, and withhold the praises that are part of the normal manner in which a Government conduct their business, their dislike of the Civil Service compared with those who earn their living in the market economy is clear and unequivocal. The employer-employee relationship and the industrial relations aspect, on which we are berated time and again by the Government, is an essential aspect.
If we do not achieve good industrial relations in the Civil Service, not only will this Government and the next Government suffer; so will the whole population of Britain through the way in which the country is administered. When we receive those lectures on industrial relations we must look to the Government to see how they are operating their industrial relations. It is an easy matter to run the Civil Service. There is a fund of loyalty, which has existed for centuries. If one had to pick loyal people, civil servants would be somewhere near the top, if not at the top.
I have a long association with the Civil Service extending back to my days on the Fulton committee. I know, as the Minister may know, of the great dissatisfaction and distaste felt by a number of those loyal civil servants who are torn between what they consider to be wrongs done to them and what they should do because of their position. It may be that Ministers, seeing only the top civil servants, are not aware of what is happening at levels not far below the top. I urge those with responsibilities in that area to look a little further than their immediate preoccupations allow.
The issue is of enormous importance. The settlement of the dispute is not a question of money. People believe that the Government have played a rather mean trick because they suspended the pay research unit unilaterally. They could have imposed a freeze on wages. That has been done before. If the Government had said that they could

not afford a rise, that might have been understood. But the arrangements that have been made in dealing with those who understand and comprehend these matters have been most distasteful. That has resulted in a declining morale in the Civil Service. The Minister may realise that he is not receiving the service from civil servants that he used to receive as recently as a year ago. That fact is known to everyone. It used to be possible, in certain circumstances, to ask civil servants to operate well beyond their normal call of duty, and they did so willingly. That does not happen so easily now. I shall not go further than that, because I hope that the process is reversible. That is the message that the Minister must convey to his colleagues, and hope to achieve a settlement of the dispute at the earliest possible moment.

Mr. Peter Rees: We have had a wide-ranging debate about what was a modest and narrowly-drawn clause. Perhaps it is none the worse for that. Perhaps the House should investigate these matters. Having listened as carefully and sympathetically as I could to the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), I am bound to say that his perception of the problem is obviously rather different from his perception of a somewhat similar range of problems faced by the Administration of which he was a member.

Mr. Austin Mitchell: Nothing like.

Mr. Rees: The hon. Gentleman may not recall the winter of discontent. He may not recall the VAT problems that the Government inherited from the Labour Administration. We know that he has a gay, boyish enthusiasm for our debates, without a great understanding of the problems about which he speaks.
The right hon. Member for Ashton-under-Lyne made several highly mischievous points, as he well knows. He said that the Government do not like civil servants. Of course we do not like the present industrial action. Of course we do not like its impact on a large number of our fellow countrymen, both in business and without. But to suggest that the Government have any personal animus against the Civil Service is absolute nonsense. I do not know how he discharged his duties. I understand that they were somewhat comparable to mine. From time to time he came into contact with the Civil Service. How far he ventured outside Whitehall he will no doubt explain on a different occasion.
During the short period that I have been charged with my responsibilities I have gone outside Whitehall. I have seen the Revenue Departments working in many parts of the country, and not exclusively in Somerset House or King's Beam House. On appropriate occasions I have expressed my appreciation of the work done and the loyalty shown, but that cannot prevent me, on this occasion, from expressing my concern about the damage being done to sections of our community. That concern has been expressed from both sides of the House. The right hon. Member for Orkney and Shetland (Mr. Grimond) mentioned a company operating in his constituency that is in financial difficulties. My hon. Friend the Member for Harborough (Mr. Farr) is rightly concerned with pharmacists and the double glazing industry. Concern is felt on both sides of the House.
The hon. Member for Batley and Morley (Mr. Woolmer) made a long and powerful speech. He was the only Member who did not express similar concern. He was speaking from a rather special position.

Mr. Woolmer: That is an equally mischievous, if not even more mischievous, remark than the one of which the Minister accused my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon). He knows well that I made it clear that I support the new clause. I also made clear my regret about the impact of the current dispute. I drew the Government's attention to the fact that if they cared as much for their own industrial relations as we care for the effects of the Civil Service dispute on those outside the House we might move a little nearer to a resolution of the dispute. I ask him to withdraw that imputation. I did not at any time show anything less than concern about the position.

Mr. Robert Sheldon: rose—

Mr. Rees: I shall not give way. I wish to answer the hon. Member for Batley and Morley. I cannot answer two Members at the same time. I am delighted that the hon. Member for Batley and Morley has, at this late stage, made his position clear. It is right that he should do so. I shall study with close interest his contribution in Hansard, as soon as it is printed.

Mr. Sheldon: I rose earlier because I thought it would save time, and I wished to deal with the same point. I deeply resent the Minister's comment about my mischievous speech. I said what I firmly believed. I have some backing for that. This is not the place or the occasion to go into that in any great detail. What I said I had thought out previously. I hope that the Minister will have the courtesy to recognise that.

Mr. Rees: I am sure that the right hon. Gentleman never makes a light and unconsidered remark. However, I shall not withdraw a single sentence of what I said. The tenor of his speech was highly mischievous.

Mr. Campbell-Savours: Get on with it.

Mr. Rees: Let us by all means return to the main point. I have always thought it a courtesy of the House that those who reply to a debate, for either the Government or the Opposition, deal with the points raised. If the hon. Member for Workington (Mr. Campbell-Savours) pays me the compliment of reading my original speech in Hansard, he will notice that I limited myself closely to the subject of the new clause. I have only been drawn to comment on the more general remarks because of the tenor of the interventions from Opposition Members.
The right hon. Gentleman's perception of the problem appears to have changed a little during the past two years. He is also a little historically inaccurate. The Inland Revenue Depaertment was derived from the Customs and Excise. Perhaps that is a matter of historical curiosity. I did not entirely understand the rather heavy weather that he made of the various discretions of the two Departments. The Customs and Excise does not have any general discretion in the area of tax. Neither does the Inland Revenue—[Interruption.]The right hon. Gentleman, from a sedentary position, persists in giving the House a constitutional lecture about the powers of the Customs and Excise and the Inland Revenue. I shall be delighted on

another occasion to engage him in debate. However, it is not relevant to the point in hand— [Interruption.] If I have been drawn to rather more asperity than on other occasions it is because of the tenor of the remarks from the Opposition Benches.
We are discussing a matter of some delicacy. I take that phrase from the hon. Member for Batley and Morley who said that it was a delicate matter. We should show a certain responsibility in our utterances. That is why I limited myself to the theme of the new clause. I did not wish to enlarge the debate into a general debate on either industrial relations as a whole or as it affects the Civil Service at this melancholy moment. However, I felt it right and proper to answer some of the points raised by the Opposition.
I say to my hon. Friend the Member for Harborough that attempts have been made to mitigate the difficulties by making enhanced payments. There is recognition of the VAT difficulties that have been experienced.
The right hon. Member for Orkney and Shetland and others have particular companies in mind. We profoundly regret the damage done to companies' cash flows by the delay in the repayments of VAT. Regrettably, there is no practical way of making those payments in the present conditions.
The hon. Member for Batley and Morley said categorically that the trade unions had offered to handle VAT payments manually. I must say categorically that no such offer has been made to the Government or to the Commissioners of Customs and Excise. If such an offer had been made, it would not have been possible to handle the thousands of repayment claims manually. This aspect of Customs and Excise work has been computerised for some years. It is no longer possible to move back to a manual operation. I am sure that the hon. Gentleman knows that practically speaking it would not be possible to achieve a solution to the problem by embarking on a manual operation. I hope that my comments put that aspect of the problem in perspective.
The hon. Member for Bailey and Morley said that the cost of the Government's new clauses and amendments had to be dragged out of us. If he studies the reports of our debates in Standing Committee I am sure that he will find that my Treasury colleagues and I were ready to give the figures where possible. The interest on overdue tax runs on average at £30 million a year. It is impossible for me to say precisely how much of that interest is likely to be forgone. That must be a matter of speculation. One of the consequences of the present regrettably circumstances is that we do not have perfect records.
Normally, VAT repayments run at about £110 million or £120 million a week. The inability to make the repayments is having an impact on business. There are firms and individual taxpayers who cannot cash their cheques. Indeed, the cheques may not have been sent. There are some cash flows that will have benefited. Regrettably, there is no precise correlation of the two groups—namely, those who have benefited and those who have not.
The hon. Member for Workington made a rather highly charged prediction that small businesses would panic at the conclusion of the industrial action. Surely their response will be precisely the reverse. I am sure that they and everyone else will be happy when the industrial action is brought to a close and the proper business of collecting and repaying tax can continue.
I was pressed by the hon. Member for Batley and Morley to say what the long-term consequences of the industrial action will be. I assure the House that we shall draw the necessary lessons from this sad interlude. That is important for the general administration of the nation. It is vital from the point of view of the Customs and Excise and the Inland Revenue that we draw those lessons.

Mr. Tim Eggar: Is it not the case that the majority of small businesses while suffering some inconvenience, fully support the Government in their determination to keep Civil Service wages under control?

Mr. Rees: I am sure that they recognise that there are certain important principles at stake. I am gratified that there is a measure of support for the Government's position. I do not think that it is necessary to broaden the debate, as some hon. Members have tried to do, by discussing the rights and wrongs of the measures that have been taken to bring the dispute to a satisfactory and honourable conclusion. I am sure that the House wishes that such a conclusion had already been achieved, not only for the better administration of the nation but to reverse the unfortunate impact on many sectors of our community, which has been drawn to our attention by those on both sides of the House.
I do not pretend that the new clause provides a perfect solution to the hardships that have been suffered by the business community. I take issue with the hon. Member for South Ayrshire (Mr. Foulkes), who said that the clause was designed for small businesses. That is not so. It was designed for anyone in business. I accept that it is likely that there are more small businesses than other businesses in the repayment category.
The hon. Member for Batley and Morley candidly declared his interest. Having declared it, and having made a rather partisan speech, I think that he was slightly unfair to my hon. Friends when he said that they made speeches from a certain position. My hon. Friends did not comment adversely on certain of the remarks made by the hon. Gentleman. They were merely concerned to underline, as are the Government, the hardships that can be inflicted by industrial action of the sort that we are witnessing. The clause is designed to ameliorate at least some of the hardships. I hope that it will command the support of both sides of the House.

Question put and agreed to.

Clause read a second time, and added to the Bill.

New Clause 1

National insurance surcharge

In section 1(1) of the National Insurance Surcharge Act 1976 for the words "3½ per cent." there shall be substituted the words "2½ per cent ."'—[Mr. Shore.]

Brought up, and read the First time.

Mr. Peter Shore: I beg to move, That the clause be read a Second time.
The clause is simple enough. It is, as the House will readily recognise, a major amendment. If the Government concede it, it will mean the loss of about £1,000 million of tax revenue in a full year and about £700 million in this already advanced financial year.
The Treasury Bench will not be surprised that I have introduced the new clause. In the first speech that I made

to the House as Shadow Chancellor on 15 January I called for five immediate measures to assist our ailing economy. The second measure in my list was a considerable reduction of the national insurance surcharge and eventually its repeal. In my reply to the Budget Statement on 11 March I returned to the same important matter. I asked for a cut of one-third this year. I said that if that cut proved unacceptable the Government should make the cut selectively in the surcharge raised on companies and enterprises that form our manufacturing industry.
The argument for such a cut seemed, when I first advanced it—my feeling has been strengthened as the months have passed—to be overwhelming. The national insurance surcharge is wholly within the Government's control. It bears directly upon the cost of British industry and its competitiveness in both the domestic and export markets. It is in the area of competitiveness that the United Kingdom has suffered its most serious setback since the Government took power. Indeed, from May 1979 to the end of 1980 our competitiveness declined by no less than 40 per cent. The Government may claim that part of this—25 per cent., I suppose—was due to the rise in relative labour costs in the United Kingdom as compared with the average among our industrial competitors. But they must also accept that a substantial part—15 per cent. —was due to the increase in the exchange rate of sterling.
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I pause at this point to say this. I know that occasionally the Chief Secretary has had exchanges with me on the subject of the national insurance surcharge. Whether the right hon. and learned Gentleman himself was responsible I cannot clearly recall, but occasionally Conservative Members have suggested that because the Labour Government introduced the surcharge the points that we now make are somehow invalidated. That is not a valid argument. Whether the timing of its introduction was wise leaves plenty of room for argument, but there is no room for argument in this respect. A national insurance surcharge against a background of an otherwise clearly competitive exchange rate and competitive industry is a very different matter from a surcharge when competitiveness has declined by an almost unbelievable 40 per cent. in the past two years.
On two points there can be little dispute. First, the massive loss of competitiveness to which I have referred has greatly contributed to the appalling increase in unemployment, above all in the past 15 months. A second major factor, contributing to the unparalleled loss of competitiveness, has been the Government's pursuit of monetarist policies, and in particular quantified targets for M3. Added to that is the associated deflationary fiscal stance that the Government have adopted.
It was the, albeit unsuccessful, pursuit of those monetary targets which led to the massive increase in interest rates in 1979–80, with no less than 17 per cent. MLR, which attracted large amounts of foreign currency into sterling, helping to drive the exchange rate up to what we regarded as a totally unrealistic level when in fact it should have fallen to take account of the underlying loss of competitiveness.
The monetarist doctrine also greatly affected the Government's approach to pay settlements. For a considerable period after the May 1979 general election it was their simple belief that by announcing and adhering


to quantified targets for the money supply they would influence both the climate of pay settlements and the capacity of firms to meet excessive wage demands.
Whether, other things being equal, this could ever have happened, I am very doubtful, but other things were not equal. Through their own folly, the Government accelerated the inflation rate by budgetary and other actions and added at least 8 per cent. to the rate of inflation in the summer of 1979. That inevitably affected pay bargaining in those years, as trade unions fought to sustain and, where possible, to improve, their standards of living.
Since the Budget, there has been some change in the exchange rate. The fall of sterling has been most marked against the dollar—about 16 per cent. —but there has been little improvement in our position vis-a-vis other currencies, including European currencies. The improvement in the exchange rate, such as it is, owes nothing to the Government's policy. It is above all the consequence of, first, the pursuit of very high interest rates by the United States Administration, secondly, recent changes in oil prices and a temporary excess of supply over demand, and, thirdly, the increased understanding and apprehension in many countries that the Government in their economic strategy have embarked upon a failure course.
In spite of these changes, the benefit to Britain in improved competitiveness in the last three months is still small—about 6 per cent. effective depreciation, taking the basket of currencies as a whole. That is very small indeed compared with the massive 40 per cent. loss of competitiveness that we had experienced since May 1979.
It is important at this point to recall the considered judgment of the CBI as recently as March this year. In its document, "The Will to Win", which I am sure hon. Members on both sides have read with interest, the CBI asserted:
To restore international price competitiveness to its level of two years ago would, at the existing exchange rate, take until early 1984, even assuming no pay rises at all and a 5 per cent. increase in productivity in each of the next three years".
The Chancellor and the Chief Secretary should consider that judgment very carefully. The Chancellor, in particular, should consider it before addressing his next homily to the trade union movement. The last time that he addressed him self to this question, at the Birmingham Chamber of Commerce on 26 June, he acknowledged the seriousness of the loss of competitiveness but denied that there was anything that the Government could do about it. As he put it,
it is no use thinking that the Government can conjure the problems away by engineering the devaluation of the pound.
Instead, according to the Chancellor we shall have to get our costs down by keeping increases in labour costs
in line with those of our overseas competitors from now on. We will actually have to do better than our competitors: lower pay rises or greater productivity gains or a combination of both".
In effect, he is saying that the whole burden of adjustment and the recapture of competitiveness—the whole effort to regain the massive loss over the past two years—must now fall upon the trade union movement, which must accept minimal wage increases--or rather decreases—not just this year but for many years ahead, until we are once again competitive with our major industrial and trading rivals.
I repeat the most relevant passage from the CBI document, that it would
at the existing exchange rate, take until early 1984, even assuming no pay rises at all and a 5 per cent. increase in productivity in each of the next three years.

I do not believe that anybody in his right senses believes that we can have a period of three years with no pay rises and a 5 per cent. increase in productivity each year.

Mr. Peter Bottomley: Will the right hon. Gentleman remind the House by how much the real pay of those still at work has increased in the past two years?

Mr. Shore: I acknowledge not only that pay has kept in touch with increases in the cost of living but that in a number of areas it has gone ahead. I am aware of that.

Mr. Bottomley: By how much?

Mr. Shore: If the hon. Gentleman knows the answer to his own question, let him answer it himself. Why waste the time of the House? I am aware of the position. My point is not whether that is to be welcomed in the present circumstances; it is that we have suffered a major loss of competitiveness. That is the matter to which we should address ourselves. With a going rate of inflation of 12 per cent. this year, which will almost certainly remain in double figures through 1982, it is impossible to contemplate the idea of no pay increases plus 5 per cent. growth in productivity which the CBI and the Chancellor seem to contemplate. There is no possibility of that at all.
That is the background against which we present our modest proposal for a cut in the national insurance surcharge. Apart from interest rate and exchange rate policy, this is one of the few measures available to the Government to help to lighten the burden and to increase the competitiveness of British industry.
The case for reducing the surchage can be argued negatively or positively. Negatively, clear disadvantages flow from the tax. They have been convincingly rehearsed by many critics, including the CBI, which I pray in aid once again, in its Budget representations to the Chancellor, which I believe were made in February this year.
First, the surcharge is a charge on exports but not on imports. It therefore reduces competitiveness both at home, against the imported goods of our trading rivals, and abroad, in our export markets. Connected with that, the national insurance surcharge raises prices at home and tends to increase labour costs. That factor also works through.
Secondly, it is a tax on jobs, which I should have thought was the last thing that we wanted—certainly at the present rate—at a time of unprecedented high and still rising unemployment.
Thirdly—this ought to appeal to the Government—it squeezes profits and damages or reduces the capacity of firms both to sustain existing production and to embark upon necessary new investment.
The impact on profits is not always—nor should it be—a prime concern. But as the Government know full well, owing to the disastrous effects of their own policies during the past two years, the profitability of non-oil companies in the United Kingdom has been reduced to probably the lowest-ever recorded level. Last year and this year, thousands of British firms have been forced into liquidation. Indeed, in the first quarter of this year, the share of company profits in GDP reached 5.9 per cent. , the lowest on record and well under half—this is how rapidly things have changed—the rate of profitability recorded only three years ago in 1978.
If the Chief Secretary needs further persuasion, I should add that the national insurance surcharge falls particularly harshly on small firms, as they are typically more labour-intensive than large capital-intensive firms.
I turn to the positive benefits that would undoubtedly follow from the proposed reduction in the national insurance surcharge. I am sure that the Chief Secretary will let us know if he has any reason to disagree with the figures that I am about to quote. A 1 per cent. cut in the national insurance surcharge rate will reduce unit wage costs by about 0·8 per cent. That in turn will within the year feed through into prices, as a result of which prices will be reduced by about 1½ per cent. That in turn will increase real take-home pay, and hence personal consumption, which could rise by up to 1½ per cent. over the next three years.
Secondly, the reduction in company tax payments will lead to an immediate and substantial improvement in company profits in the first year. The impact has heen measured and appears to be about £½ billion. That is a substantial improvement.
I have used the Treasury's own model to look at the consequences, over time, of this proposed 1 per cent. reduction. They are particularly encouraging, as over the three-year period benefits increase rather than decrease or remain stationary. Therefore, by 1984, there would be an increase of 0· per cent. in GNP, a reduction of more than 80,000 in the numbers unemployed and a gain of about £300 million in the balance of exports and imports. In addition—this may be particularly attractive to the Government, knowing their obsession with the size of the PSBR—the offsetting effects of improved competitiveness and increased economic activity would reduce an initial tax loss of £1,000 million to half that figure in 1982 and to a mere £163 million by 1984.
I said that many factors other than national insurance surcharge affected competitiveness. I would not want the House to believe that this was our only proposal to assist our industries. In the Budget debate on 11 March I called for a reduction in duty on heavy fuel oil, a further cut in interest rates, a more realistic level for the £ sterling and measures to increase demand in the British economy. All those things are necessary if we are to begin to climb out of the deep pit into which the policies of the Prime Minister and the Chancellor have cast the nation's economy.
The urgency of this measure is made all the greater by the developments in the economy since the Budget was presented three months ago and the emerging, unfavourable trends in Government policy itself. We now know that the prospect of reaching single figure inflation even next year has been greatly reduced.

Mr. Campbell-Savours: My right hon. Friend said that the introduction of this measure would result in a £500 million benefit by 1984. Will he comment on the relationship of that in terms of the incentive to companies to expand as against the concessions that have been given in capital gains tax and capital transfer tax since 1979? Is not my right hon. Friend's route a more effective way of establishing the objectives set out by the Chancellor in reply to me during the most recent Treasury Question Time?

Mr. Shore: I agree with my hon. Friend. If any money is available for tax concessions, I think that anyone who considers the real needs of the British economy today will agree that the most obvious way in which it should be deployed is to assist in the cost-competitiveness and expansion of our industry. That is so self-evident that it is amazing that it has not been reflected in the policies that the Government have pursued.
I was saying that the prospects of reaching single-figure inflation are now looking remote, even for next year. Last week the wholesale price index gave substantial evidence of the more adverse trends. From the reports that I have seen, the Treasury's own short-term forecasts now accept that this change in our prospects has taken place.
Furthermore, the prospect in the short term of any fall in British interest rates has also faded. Short-term interest rates have been rising. Inevitably, there was speculation last week that we would see an increase rather than a further cut in MLR. Although one cannot be entirely certain, it appears that the Government are abandoning their neutrality on the exchange rate and that the Bank of England has been intervening far more strongly in the exchange market, with the purpose not of making sterling more competitive but rather of making it less competitive.
Only this morning we saw the latest figures for the index of industrial production. I know that the Chief Secretary is a devotee of that index, as his last major speech in the House was based wholly on the previous month's results, which he found gave him a little encouragement. We now have a further month's figures, and it is all too plain that the prospect of an early revival of the British economy, however modest, has receded into the autumn mists and beyond.
It is against all these adverse trends of policy and events that are making for the continued, if not increased, uncompetitiveness of the British economy that we put our proposal to reduce the national insurance surcharge. It is the one positive contribution that can be made by the Government immediately to assist our hard-pressed industry. I strongly commend the clause to the House.

Sir Brandon Rhys Williams: I listened with interest to the right hon. Member for Stepney and Poplar (Mr. Shore) suggesting a reduction of 1 per cent. in what is, in effect, the total burden that the community places on the back of the creator of wealth. I wonder why he chose I per cent. I do not think that he made the most of his subject, because the relationship between national insurance and income tax is a large subject. He might with advantage have gone into it more deeply.
I shall try to touch on some of the points that might have been raised, because they include some fundamental issues. What burden should the community place on the back of the creator of wealth? Let us examine the present burden. We take 30 per cent. in income tax, The employer's contribution, including the surcharge, adds 13·7 per cent. to that and the employee is expected to pay 7·75 per cent. By my reckoning that comes to 51·45 per cent. on every £1 between £27 and £200 a week.
I have often recommended that we should end the national insurance scheme because it is becoming a ridiculous rigmarole and a farce. It might indeed be better to reduce the tax by 1·45 per cent. and make it a flat rate of 50 per cent. We would then be approaching clarity and


comprehensibility in the relationship between the community and the individual. It would have the advantage of simplicity and equity.
I would go further and reform the income tax system so as to take out all the gaps and pockets and all the short and long ends in the areas in which the tax is levied, making good the losses to the employee by paying positive benefits instead. In other words, we should unify the tax allowances and the social benefits. We should then be paying a minimum income guarantee to every citizen, whether in work or not. Those in work would get the benefit of a minimum income guarantee, replacing their tax allowances; and those out of work would get the benefit of what succeeded the present rigmarole of national insurance, with all its unfairness and injustice.
In other words, the Government should reconsider the whole tax credit scheme which used to be a commitment of the Tory Party. Why are we waiting? There has been progress. We have made progress in amalgamating child tax allowances with family allowances, and now we have the unified child benefit. That was a great leap forward. The Government are also doing what I believe to be right in tackling housing allowances. There is more to be done before we have rationalised the different ways of subsidising housing in our tax, national insurance and other systems.
I hope that we can tackle the personal allowances next, and put them on a positive basis, too. If we amalgamate PAYE and national insurance, instead of keeping national insurance contributions separate from income tax, and collect them through the same mechanism, we shall have made a great leap forward both for payment and receipt in simplifying the administration of the Revenue and in clarifying national insurance.
I have often drawn attention to the fact that the redistribution-of-income industry employs well over 150,000 people. Including the number of people who have to work on behalf of the Revenue in employers' offices calculating F'AYE, the redistribution-of-income industry is now probably 200,000 people strong. Between the lot of them, they do not add £1 to the real national product. They are engaged either in taking wealth away from their fellow citizens or handing it back to their fellow citizens, without themselves producing any wealth. What is more, we ask them to do it by the most obsolete methods. I press the Government, for the sake of efficiency, transparency and incentives, to re-examine the whole business.
I know that Sir Derek Rayner has been sent out to see how he can improve Civil Service efficiency. I am sure that he has done a wonderful job, as a man might with a butterfly net in a locust storm, but that is not how we shall improve Civil Sevice efficiency or cut the cost of public administration.
Because of the troubles in the past week, which have attracted so much attention, I wish to make another point. We must hasten to end the division of the nation between those in need and those in work—the same Disraelian "Two Nations" as we had 150 years ago—a division that was the object of the Conservative Party's attention then as it should be now.
The entitlement to benefit when based on need is divisive. We place far too much emphasis on it in our social policy, when we have 4 million—or is it now 5 million? —people dependent on supplementary benefit. That is a two-nation division that we can no longer

tolerate. The entitlement to benefit should be based on citizenship, because that is what makes for equality and social unity.
Hon. Members will ask how we afford a minimum income guarantee for every citizen that is enough to live on. The answer is that we afford it now, because nobody in this country, thank God, is destitute. I am not necessarily suggesting that we should increase anyone's standard of living at once by the reform that is now long overdue; I am simply saying that we should do what we are doing in the way of the redistribution of income in a rational way that accords with the principles of justice.
Tax will introduce the element of selectivity, because when people return to employment and start to earn money they will incur tax, which is the way of making their necessary contribution to society. For those with their own income, without destroying the principle of a minimum income guarantee based on citizenship, we can implement the principle of from each according to his capacity—through the payment of tax—and to each according to his need—by the payment of a minimum income guarantee. The income tax is what achieves selectivity. The means test, while we continue to apply it, simply brings disunity and social strife.
I return to the question asked by the right how Member for Stepney and Poplar: what is the rate at which we should be levying tax? What is the total burden that the community is entitled to place on the back of the creator of wealth? Indeed, what is wise? At present 50 per cent. probably must be the rate. I do not think that we can manage with less.
Underlying all this is the great moral question: what is mine and what is ours? That is what we must decide. How much are we entitled to take home of what we have created, and how much belongs to the community that provides the environment in which it is possible for us to create wealth? The nation must decide the rate of tax, but it must do it with a clear understanding of the moral implications and the way in which its decision will affect the amount of benefit that can be paid out in the form of the minimum income guarantee.
I come to the advantages of a tax credit or minimum income guarantee scheme. First, it becomes possible to abolish unemployment as a way of putting people into a separate category. We no longer have to push them down to become second-rate citizens under the yoke of enforced idleness. If everyone has a minimum income guarantee, he can take part-time or full-time work; he can moonlight, doing two or more jobs; or he can live without any income other than the minimum guarantee, though I hope that few people would choose to do that if the opportunities for work existed for them.
If wages are paid net of tax, we can abolish income tax on earned income, because if employers pay the same to the community as they pay to the worker, which is what a 50 per cent. rate of tax means, the worker can have the whole of his pay. He can come to a net-of-tax pay agreement, and if he then proceeds to earn more he can have the whole of the increase. Looked at in this way, the employers' surcharge entirely absorbs pay-as-you-earn and national insurance. Income tax is not 50 per cent. of gross taxable earnings; it becomes a social contribution of 100 per cent. of net pay.
I do not wish to bewilder hon. Members with these considerations, but they arise directly out of the new clause. I beg the right hon. Member for Stepney and


Poplar to bend his thoughts to the philosophy that I have expounded. There is a social need to make major reforms in the way in which we deal with each other in terms of cash. We shall not solve our problems as a nation until we see things as they are.

Mr. Richard Wainwright: I am happy to speak after the hon. Member for Kensington (Sir B. Rhys Williams). He has added his own highly distinguished contribution on tax credits to the pioneering work done by his mother. I admire his continued persistence and ingenuity and the way in which he has survived all the rebuffs that he has received at the hands of Conservative Governments—including this one—as well as at those of other Governments. It is a little depressing to my spirit to recall the eloquence of his late mother and the way in which she advocated a tax credit scheme of great ingenuity and originality over 30 years ago.

Sir Brandon Rhys Williams: Forty years ago.

Mr. Wainwright: I stand corrected. I heard her speak just over 30 years ago. However, the House has in those years been afflicted by an absurd two-party zig-zag. Time has been wasted by bandying epithets across the Chamber. As a result, such tax credit proposals have been neglected. Of the Government's many perversities, none will be recalled with a sense of greater absurdity than the way in which they have persisted with a tax on jobs at a time when self-inflicted unemployment is out of control, is seriously damaging the chances of millions of people and is threatening our nation's coherence. The Conservative Party was the first to attack when a Labour Government first proposed the tax as a temporary expedient. However, the Government are now defending it as if it were the Ark of the Covenant. It is a deliberate tax on jobs.
As long as the surcharge remains, the bill for national insurance to the employer and employee—the tax on jobs—will continue to get worse. We are afflicted with another perversity—a system whereby those who manage to remain in work and their employers—who suffer more and more from the recession—are expected to bear the cost of unemployment benefit. I hope that the Chief Secretary will give us his estimate of the total percentage of employer and employee contributions in a year's time. The contributions continue to rise because of the absurd convention that the survivors from the wreck shall pay all the benefits and compensation to those who are deliberately deprived of their jobs. As has been said, that contribution figure now stands at 21·5 per cent.
My hon. Friends and I support the amendment because it has the advantage—at a time when the nation is becoming increasingly and perilously divided—of being advocated by both sides of industry. In its recommendations of February this year for the Budget, the Association of British Chambers of Commerce—which is often closer to industry's pulse than the CBI—took great pains to recommend that the Chancellor of the Exchequer should reduce the employers' national insurance liabilities. It pointed out that apart from the benefit to industry and employers, such a reduction would
reduce some of the financial pressure on local authorities, which, of course, pay substantial sums for their own employees. Responsible local authorities will thus be enabled to reduce their rate needs, providing further aid to industry and commerce.

In a welcome way, the Association of British Chambers of Commerce was joined by the TUC. It produced an interesting document—which has a lot to be said for it—entitled "Plan for Growth" and dated February 1981. It states:
National Insurance contributions starting in April must be reversed, and the employers' National Insurance Surcharge should be cut by ½ per cent. to 3 per cent., provided the money is used to save jobs.
Finally, the CBI pointed out, as has been mentioned in the debate, that this is a tax on jobs, a charge on exports but not imports and that it greatly reduces our competitiveness. The CBI also reminded us:
Of the total tax paid by the market sector, manufacturing … pays nearly two-fifths. The bulk of the remainder is paid by the construction industry … the distributive trades … by sectors connected with the invisible trade … and shipping.
In those circumstances it requires extraordinarily special reasons for the Government to refuse to move. A drop in the tax take of approximately £700 million would be the beginning—the first glimmer of hope of some resurgence of the national demand that industry so badly needs. The Government could send no more encouraging message to a beleaguered country at present than that signalled by an acceptance of the amendment.

Mr. Eggar: I was interested in the remarks of the right hon. Member for Stepney and Poplar (Mr. Shore). It must have been of some comfort to the hard-pressed and loyal civil servants in the Treasury that all they had to do when they saw the right hon. Gentleman's amendment was to reach up into the cubbyhole and dust off the brief that they had last given the right hon. Member for Leeds, East (Mr. Healey) and, I dare say, the right hon. Member for Ashton-under-Lyne (Mr. Sheldon).
I do not wish to tread over the same waters that the right hon. Member for Stepney and Poplar covered. I recognise that the Government have made a clear Budget judgment which will not produce sufficient funds to permit a reduction in the national insurance surcharge this year. I accept that, but I hope that my right hon. and learned Friend the Chief Secretary is considering seriously the suggestion by my hon. Friend the Member for Bath (Mr. Patten) in an interesting article in The Times. My hon. Friend suggested that in view of the considerable importance that the Government are attaching to the next wages round they should, in the relatively near future, tell industry that if wage levels are set at 5 per cent. or below, the Government will be able in the next Budget—all other things being equal—to reduce that national insurance surcharge by, let us say, 1 per cent.
The argument that has always been put by this Government and the Labour Government is that the national insurance surcharge should not be reduced, because that reduction would be a straight addition to wages. My right hon. Friend shakes his head, but I am sure that he will set me right later.
One can easily reverse that argument and suggest that a possible reduction in the surcharge should be used as an incentive to employers to keep wage settlements at a reasonable level next year. I trust that my right hon. Friend will consider that suggestion. I shall be interested to hear his comments on it.

Mr. Campbell-Savours: The whole House will be indebted to my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) for his able comments on the major 40 per cent. decline in competitiveness, to which he drew


the attention of the House. Most hon. Members will be conscious of the effect that a decline of that magnitude has on introducing and retaining the sort of social services that are necessary if we are to avoid the difficulties that confront not just the Government but every hon. Member, especially those who represent inner cities.
In the light: of the developments of the last few weeks, it is not just a question of blaming the Government; we must all accept responsibility for what has happened in a large number of areas. We must examine the general developments in competitiveness over the years, certainly since the early 1970s.
If hon. Members in all parts of the House accept that there is a decline, they should show the kind of unanimity that exists outside on the need to reflate the economy in such a way that we can generate the increased wealth necessary to fund all the social services. As the hon. Member for Colne Valley (Mr. Wainwright) said, there has been unanimity between the Confederation of British Industry and the Trades Union Congress on the need for an initiative in this area.
At the time when the national insurance surcharge was introduced in 1976 there was a general feeling of alarm in the House. There was alarm on the Labour Benches when the then Labour Chancellor of the Exchequer introduced the measure, because it was felt that it would have an impact on employment. Certainly there was alarm expressed on the Conservative Benches, and in particular by the then Shadow spokesman.
I should like to quote the comments that were made by the right hon. Member for St. Ives (Mr. Nott) when he rose to reject the argument that was put from the then Government side for the introduction of the national insurance surcharge. He said:
To talk about a 2 per cent. surcharge on national insurance does not emphasise the fact that it is an increase of about one-quarter—nearly 25 per cent. —on the only tax that we now have on jobs, and particularly on the productive, wealth-creating part of the private sector. Like all taxes—it has nothing to do with national insurance or other benefits—it will no doubt find its way out of people's pockets into the Consolidated Fund where the Government will use it to employ more people in the public sector, to finance further extravagant projects and to ensure that the parasitic public sector continues to suck the life blood out of the wealth and job-creating private sector of the community.
The right hon. Member went on to say:
The Government's proposed increase will not finance higher benefits. It will go straight into the Consolidated Fund where it will be used as part of the general pool of taxation and it will destroy jobs in the process." — [Official Report, 30 November 1976; Vol. 921, c. 863.]
So there was a recognition at that time that the measure would destroy jobs. If that was the attitude of the Conservatives in 1976 on the introduction of the measure—that it would destroy jobs—we must presume that today the same people believe that it is directly responsible for the absence of jobs in the economy.
It was suggested by my right hon. Friend that about 80,000 jobs would be created over the next two years, based on the computer model that we used. How many new jobs does the Minister think our amendment would create if the Government were to accept it?
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I hope that ray right hon. Friend's comments made it clear to the House that the effects on the public sector borrowing requirement would be far less than would appear at first glimpse. It seems that by 1984 they would be down to about £160 million, and we can presume that

as the years pass the impact would increasingly reduce. I wonder to what extent that has been taken into account in the rejection that we presume the Chief Secretary will now make.
Opposition Members presume that this matter is to be rejected, because over the last few months we have learnt that when the Government are about to take an initiative and make a statement at the Box they always leak it. This Budget has been a particularly leaky Budget. It was interesting that many of the matters that were included in it were foreshadowed in press comment prior to the Budget Statement. Therefore, on this occasion we can presume that once again we shall not win the argument, because there has not been a leak to the effect that we would do so.
It is clear that this measure would have a major impact on our export prices. Manufacturers would be able to reduce their costs. I also wonder whether the Chief Secretary accepts that it would be beneficial to our export performance. I am sure that he has done his projections on the value of our new clause. Will he say to what extent he accepts that it would affect our ability to compete in export markets?
It would be highly beneficial to many companies who are currently wearying of their cash flow problems. I presume that because it would be beneficial in terms of cash flow, it would have the same effect as tile introduction of the kind of subsidies that Conservative Members have already said. that they wish for energy prices. If Conservative Members press aggressively for energy price subsidies—to the paper, board and steel industries and to other areas of energy-intensive manufacturing industry—I cannot see why the same hon. Members, recognising that this would have an effect in the same way on the cash flow of companies, should not on this occasion wish to support our new clause.
Perhaps a number of Conservative Members will feel tempted to come into our Lobby tonight. I am sure that if they were to do so they would find that many people in the country and certainly many in industry would congratulate them. That is our information. We get the same kind of correspondence as Conservative Members. I am sure that the Chief Secretary will be aware that many industrialists in his constituency and, indeed, in the whole of the Northern region, have expressed repeatedly at meetings with Members from that region the need for some concession in this area.

Mr. Peter Bottomley: My initial anger at the emptiness of the speech of the right hon. Member for Stepney and Poplar (Mr. Shore) is disappearing, because I want to convert him and my Front Bench to a different way of considering this problem.
The right hon. Gentleman talked about a reduction of 1 per cent. in the national insurance surcharge, which he rightly said would amount to about 0·8 per cent. of the pay bill. Unless something dramatic happens, we are likely to face an increase in nominal rates of pay during the next year of about 8 per cent. —10 times as much as the money being considered now. The cost of the new clause is £1,000 million. The level of pay settlements in the coming year, if around 8 per cent., will cost an extra £10,000 million. The cost to the Government will be substantially higher than the £1,000 million involved in the new clause. The people who will suffer, besides those driven out of work, are the people with family responsibilities.
The cost of the new clause is the equivalent of £1·50 a week on child benefit. Apart from agreeing with almost all that my hon. Friend the Member for Kensington (Sir B. Rhys-Williams) says, I raise the issue of child benefit to enable the House to consider the implications of a general pay increase of even 8 per cent. on the lower-paid with children. If a person with a spouse and two children received a 50 per cent. increase from £60 to £90 a week, he would keep £1 in every £6 and would be better off by £5 out of the extra £30. If his pay went up by 8 per cent., and the same applied to everyone else who had a job, the manner in which inflation operates differentially against family interests would make the poor with family responsibilities worse off.
I ask the Government and the Opposition to consider more strongly the impact on the economy of trying to get the level of pay settlements down to 4 per cent. rather than 8 per cent.—the dynamic effect on the PSBR, the likely consequence on the level of employment, which I suspect would be substantially better than the 1 per cent. off the national insurance surcharge, and the likely effect on interest rates that have some association with inflation. I believe that all the benefits to which the right hon. Member for Stepney and Poplar referred apply 10 times as much to anything that can be done fairly—I emphasise "fairly"—to reduce the level of nominal pay settlements.
The House should concentrate on the long-term plans put forward by my hon. Friend the Member for Kensington and the short-term improvements that need to be made now to such matters as child benefits if there is to be any chance of running an economy during the next 12 months that may conceivably get anywhere near the Government's planned PSBR target while achieving the ambition shared by all hon. Members to ensure that more people are not driven out of work. We need also to ensure that during the difficulties involved in not granting real pay increases to those still at work, those who need help get it at the time it is needed. The rest have to realise that when we are child-free or higher-paid, we shall not receive the kind of advantages that we have taken during the last two or three years from the unemployed and from people with children.

Mr. David Winnick: The hon. Member for Woolwich, West (Mr. Bottomley) should understand that trade unionists have a duty and obligation to try to defend their living standards. I accept the sincerity of the hon. Gentleman's general approach on child benefits. The fact is that a very different line is now taken by Conservative Members regarding incomes compared with that heard at the time of the last election. At that time, we were told that incomes policy was unnecessary and that it would not work. Such criticism may have been right and justified. The attitude adopted was the need for market forces to determine these matters.
Now we are told that incomes restraint is necessary and that without it the country cannot survive. The present trouble with the Civil Service shows only too well what occurs when a Government lay down the line on what should be the norm for income increases.
I support the new clause moved by my right hon. Friend the Member for Stepney and Poplar (Mr. Shore). I see it as a way of beginning to start reflating the economy. Every time Treasury Ministers and the Prime Minister speak they say that there is light at the end of the tunnel, that an upturn

is coming and that the situation will improve. In real life, outside the Treasury, deflation bites deeper into the economy and unemployment continues to grow substantially. That is the contrast in the country with what Treasury Ministers are constantly predicting in an optimistic and, in my view, totally unjustified way.
In considering the need for reflation and the need to overcome the present depression in our economy, one has to look only at two forecasts. One is from the Henley centre for forecasting, which shows that for the next six years the economic growth of this country will be worse than previously and that unemployment will grow substantially. The other is the outlook of the OECD, which shows that unemployment in Great Britain is now worse than in France, Germany, the United States, Canada, and even Italy. That is the position in which we find ourselves. We know what is happening on the ground in our constituencies—redundancies, closures, and the resultant hardship. The outlook is bleak.
I therefore believe that any incentive which would encourage employers to take on labour should commend itself to the House. It is more important, if I may say so, to provide jobs for the people who are at the bottom of our social heap, whose plight is so acute, and whose behaviour over the past week can to a certain extent be explained by the Government's economic policies, than it is to legislate for CS gas, water cannons, rubber bullets and the like. We need to change the course that the Government have embarked upon.
The Treasury's view on deflation is no different from what was advocated in the pre-war years. At that time we were told that there was no alternative, that deflation was inevitable, and that whatever the difficulties of the unemployed there was no other way. It was argued that if the Government intervened it would mean inflation, and so on. There is no basic difference between what was advocated before the war, which rationalised and justified mass unemployment, and what is now being argued in defence of the return of mass unemployment in this country.
My right hon. Friend's amendment should be supported to the extent that it will help to start reflating the economy, encourage employers to take on labour, and help manufacturing and exporting. No doubt the alternative that we shall be given by the Chief Secretary will be a continuation of the present course, which can lead only to more unemployment and perhaps to the same sort of disturbances on our streets as we have seen during the past week.

Mr. Woolmer: I follow my hon. Friend the Member for Walsall, North (Mr. Winnick), who commented on the contrast between the Government's optimism in May 1979 and the grim reality of the picture that we see today. In this Government's first Budget I vividly remember the way in which Conservative Members waved their Order Papers in glee at the new economic policy—the new liberating, enterprise Budget of incentives that was launched on the unsuspecting country. What a sorry sight the Government Benches now are, bearing in mind the difference between the two occasions, not simply in this debate—in which speeches are lacklustre and seek almost hopelessly for a way out of the appalling mess into which the Government have got the country—but at Chancellor's Question Time when there is scarcely a smiling face on the Government Benches.
At Quest ion Time, the Prime Minister talks about incentives and enterprise in a grim battle to explain away the disaster. The sheer misery of the depth of the problems into which the country has been plummeted by the Government's policies makes me think that the Government are like corks tossed about in a stormy sea, not knowing where to turn.
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When I watch Ministers and Government supporters I feel that they sense that they have got themselves and the country into such an appalling mess that they feel a sense of helplessness and hopelessness. Initially they mouthed the phrase that there was no alternative. Now they promise upturns which do not come. Even that little piece of optimism has almost ceased to fall from Ministers' lips. There is a sense of helpless and hopeless doom about the Government's policies. It is typified by a matter on which the Minister and I exchanged views yesterday, involving the farcical notion that resources are not available to build houses when there is a desperate housing shortage. The Government claim that resources are not available to replace collapsing sewers. They say that the resources are not available to build a modest amount of electrified railway line when a few miles away across the Channel the French Government are launching an enormous programme of modernising the railways.
To the ordinary person the Government's policies have taken on a manic insanity. They have lost the hearts and minds of the country. People do not understand how a Government can justify their policies by saying that the resources are not available. People cannot understand the Government arguing that if they take action something will happen to the money supply or the rate of interest when people can see factories where people are working only two or three days a week. They see factories grossly below capacity. Not only manual workers but managers know that they could and should be producing more commodities. The labour and the materials are there. People cannot understand.
The Government are failing the nation by being obsessed and [rapped in an intellectual straitjacket. They must break out and turn away from a method that has served them badly. If they do not break out of the straitjacket the country will be plunged into suffering 3½ million people unemployed. At the same time billions of pounds of savings are being invested in other countries to provide work for other workers. That is sheer insanity. The Government must escape their intellectual straitjacket and accept that it is insane to invest £4 billion a year in other countries' stock exchanges to provide capital for other people's jobs when our workers do not have work.
Ministers may come to the Chamber—and I suspect that they will tonight—and talk about money supply and interest rates. The Government must address themselves to the total unreality of the way in which they are governing and the enormous waste of human resources, savings and capital. They must seize the fact that they must change their policies because the present policies have led us to disaster.

Mr. R. D. Cant (Stoke-on-Trent, Central): Does not my hon. Friend agree that the only realistic scenario as regards crowding out is what is happening to pension and insurance funds as a consequence of the export of about £8 billion worth last year, leaving insufficient resources at

the disposal of the pension and insurance funds to invest in gilts and equities? That explains why the price of gilts is so low and why the stock market is struggling.

Mr. Woolmer: I am grateful to my hon. Friend, who has touched on a number of valid points. I have always recognised that the problem of how to expand the economy and to avoid inflation and wage push inflation—the problem of wage demands pushing up prices—is difficult.
It is certain that investment in this country is low because profits are low. Profits are low because the Government, as a conscious act of policy, deliberately overvalued the pound in such an exaggerated manner and deliberately kept up interest rates. Profits are now so desperately low that almost any individual measure on its own is only tinkering with the problem.
Unless businesses are able to produce more and to expand the use of their capacity, their profits will not recover. The biggest single boost to profits—here I differ slightly from my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) in his introductory remarks—would come about if the Government would set themselves on a policy of expansion in the economy. Some factories are working three days or two days a week and others are working one week in three. No individual measure, even of this nature, will restore confidence and profits to the degree necessary. Nothing less than a radical and diametric shift of policy will achieve that. I note that the Chief Secretary disagreed on that matter earlier. I recognise that there are differences of opinion. We differ, but I feel exceptionally strongly that unless those policy changes come, that tragic waste of human wealth and resources will carry on.
The measure relates to a proposal to reduce the national insurance surcharge. I shall support it tonight, not because I believe that it is the best way of going about things, or that it will mark anything other than an indication of the Government's willingness to change direction. I am sure that my right hon. Friend will agree that in itself, it has its own problems. I would sooner see £1 billion worth of spending that went immediately to create jobs and to expand demand, linking spending to jobs in such a way as to secure the co-operation and agreement of trade unions and workers to see that that expansion was immediately linked with jobs and not with wage demands. That is preferable.

Mr. Shore: I assure my hon. Friend that it is in the nature of the way in which we take the new clauses and amendments that we must discuss matters as they arise. At the time of the Budget I referred to at least a five-point programme. The first of those points is an increase in public expenditure, which I believe is essential.

Mr. Woolmer: As my right hon. Friend knows, I readily acknowledge that. At the time, his programme was greeted on Government Benches not so much with scepticism as with derision. It is now seen as a voice of sanity. Those who opposed the views put forward by my right hon. Friend at the time of the Budget debates have, as a result of continuing to back Government policies, seen not success but further unemployment, a further collapse of investment and a further outflow of valuable money and savings. It is simply not good enough to continue plunging us deeper and deeper into misery. I readily recognise my


right hon. Friend's point that he had advocated many other things. He made his proposal in the context of a series of measures that would be essential.
I wish to reiterate that if any Government are to get us out of the mess that we are in they must impress firmly into the minds of the trade unions and employers that any expansion must be related to an expansion of jobs and not to an expansion of monetary claims, big wage demands or big profit demands simply to pay out dividends. Expansion must be linked to job creation and to the physical expansion of capital and the necessary resources. If expansion is seen simply as a monetary boost that is unrelated to an expansion of real production, goods and services, the opportunity to come out of the gloom will be lost.
My reservations about the measure in isolation—I recognise that it would not be taken in isolation in an overall change of policy—is that the boost that it would provide if the Government were willing to consider a change of direction would be better provided in other ways in the first instance.
The debate has ranged wide because it touches upon a number of problems. I hope that when the Minister replies he will take the opportunity to spell out in words that the average man and woman can understand—not in a cloud of dogma and economic theory—why, with massive unemployment and with the money that appears to be available to go into other countries, the Government are not capable of seizing the problem by the scruff of the neck and providing jobs and expansion in the economy.
All those to whom I speak simply do not understand what the Government are doing. They feel almost as though the country is not being governed at all. The atmosphere around the country is one of helplessness. My great fear is that that helplessness—my right hon. Friends know that I have no illusions—will lead not to a move towards Left-thinking and radical policies but, as we are already seeing in some elements on the streets, to a Right-thinking emphasis. People who feel helpless often shift to remarkably outdated and outworn theories about how to solve problems. I hope that the Minister will put the problems into that context.
The Government seized the public's imagination before the last election. They employed agents to sell their theme. I do not say that lightly. They seized the notions of incentives, of the incentive to work and the need for enterprise. They have lost the good will and the understanding of the British people.

Mr. Brittan: The debate has consisted of three aspects. First, the right hon. Member for Stepney and Poplar (Mr. Shore) presented the new clause as part of his general economic strategy. Secondly, there has been a consideration of the national insurance surcharge in its own right. Thirdly—I do not say this in any disparaging sense—others, such as my hon. Friends the Members for Kensington (Sir B. Rhys Williams) and Woolwich, West (Mr. Bottomley), have perfectly properly taken the opportunity to express their views on the wider social aspects of the matter.
I hope that my hon. Friends will not take it amiss if I do not seek to follow their arguments in entirety. In dealing with the new clause I feel that to attempt to take

up the wider issues that they have raised would be to do them less than justice and would not reflect the thought and care that have gone into their presentation.
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I proceed to the central propositions advanced by the right hon. Member for Stepney and Poplar, which were followed through most carefully and caringly by the hon. Member for Batley and Morley (Mr. Woolmer). The new clause is considerable in scale, but the right hon. Gentleman over-emphasised the cost of implementing it. The cost would be £840 million in a full year and not the £1,000 million that he suggested. It is a component part of the strategy that the Opposition put forward, which is one of substantial expansion. The right hon. Gentleman argued in support of it in no other sense. The hon. Member for Batley and Morley spelt that out still further if need there was to do so.
The hon. Member for Batley and Morley asked me to talk in language that was capable of being understood in an ordinary sense. My answer is that the Opposition's policy has been tried and found not to work. The person who came to the conclusion that the option of spending our way out of the recession was not open to us was not a Conservative Chancellor of the Exchequer nor a Conservative Prime Minister but the right hon. Member for Cardiff, South-East (Mr. Callaghan), the former Labour Prime Minister.
The right hon. Gentleman was right. He was driven to that conclusion. The experience of the period immediately behind us was not the same as the experience of the 1930s. In recent times we have had a combination of ever-increasing inflation and ever-increasing rates of unemployment. That applied while the previous Labour Government were in office as it has since the present Government took office. It may be possible to score points by saying that the growth of inflation and that of unemployment was faster at certain times. However, the message of the immediate period through which we have lived is that inflation has been the engine and the cause of unemployment instead of there being a trade-off between one and the other.
I hope that the Opposition will accept that if I seriously thought that it would be possible to secure a substantial reduction in the rates of unemployment that are so grave a scourge on life in Britain I should do so. I see the result of unemployment in my constituency. We may differ about what constitutes the right approach, but I can assure Labour Members that if I took their view I should not shirk the consequences of implementing it. However, I do not happen to think that they are right. I happen to think that I would not be justified in taking the action that they suggest.
My right hon. and learned Friend the Chancellor of the Exchequer took a view in the Budget on the proper level of the public sector borrowing requirement and decided that if he went beyond it the pressures of inflation would mount, in a way which would have exactly the consequences that I have described. We would then see what we have seen in the past—an increase in inflation, in the short term a limited and temporary amelioration of unemployment, and ultimately, and after no undue delay, a massive increase in unemployment to follow the increase in inflation. That would be the consequence of following such a policy.

Mr. Winnick: What the right hon. and learned Gentleman is saying—he will correct me if I am wrong—is that there is absolutely no alternative to unemployment rising and in due course, not very long from now, reaching 3 million. It is a cry of despair. The right hon. and learned Gentleman is telling the House and the country that there is no alternative policy and that we must simply accept massive unemployment, although he expresses his sympathy with the unemployed. We note his sympathy, but he tells us that there is no alternative.

Mr. Brittan: That is not what I said. The hon. Gentleman does neither himself nor the House justice. Of course there is an alternative. There is, for example, the alternative put forward by the right hon. Member for Stepney and Poplar, but I have explained why I believe that that alternative would lead to a worse outcome. We are not suggesting that nothing can or should be done. That is quite untrue. Clearly, any Government will put forward a policy in which they believe and then carry it out. Anyone can be wrong, of course—

Mr. Shore: You are.

Mr. Brittan: That is not proved by an assertion from a sedentary position. The level of most of this debate has in fact been somewhat higher than interventions of that kind would suggest. It is absurd to say that because the Government support a particular policy and follow it and do not believe that an alternative is to be preferred, that is a counsel of despair. It is quite the reverse.

Mr. Shore: Do the Government really believe that their policy is succeeding? It is all very well for the right hon. and learned Gentleman to say to those of us who advocate a very different approach that we have not had perfect success. God knows, we all concede that. What is unique to the present Government is that they have actually managed to double unemployment in two years, to decrease the national income and output and at the same time to maintain inflation. For God's sake, when do Ministers start thinking and reconsidering policies that are clearly driving the country to disaster?

Mr. Brittan: When unemployment doubled under the Labour Government, that did not lead the right hon. Gentleman or the Labour Government to change their policies.

Mr. Shore: Of course it did. You have been complaining about the level of public expenditure, the public sector borrowing requirement—

Mr. Deputy Speaker (Mr. Ernest Armstrong): Order. Mr. Leon Brittan.

Mr. Brittan: The right hon. Gentleman will not find that light is generated by heat. I do not think that he does his cause justice by that kind of reaction when I try to answer the points that he makes.

Mr. Shore: I am concerned about this country.

Mr. Brittan: So am I, but I do not choose to show my concern by synthetic anger of the kind displayed by the right hon. Gentleman. Moreover, when presented with an argument for which I have sufficient respect to try to answer it, I do not find it a useful or constructive exercise, or a genuine or sincere show of concern, to come to the Dispatch Box in a petulant fit of anger in the way that the right hon. Gentleman has. I am dealing with a specific new

clause. Because I have sought to puncture the right hon. Gentleman's optimistic but ill-founded economic strategy, there is no excuse for his reacting in the way that he has.
I have explained my general view on the economic strategy. I was about to say, if the right hon. Gentleman can contain himself, that there were aspects of his speech with which I actually agreed. In particular, what he said about the competitiveness of the British economy was absolutely right. We may differ as to the right way to approach the competitiveness problems of British industry, but many of the points that have been made about wage rates and the effect of excessive wage claims on unemployment and on the economy are matters on which I would agree.
I turn to the national insurance surcharge, which is what the debate is about. Although the right hon. Gentleman was defensive in his opening remarks, it is relevant to point out that the surcharge was introduced by the Labour Government. It is also relevant to point out that all the criticisms levelled against it, which one hon. Member quoted my right hon. and learned Friend the Chancellor as making, were as true at the time it was introduced as they are now.
The right hon. Gentleman may say that economic circumstances make those deficiencies more apparent now than they were then, but he sowed that seed and introduced a tax which, if it has inherent economic disadvantages, had them from the outset, even if the conclusions may now be greater.
I hold no brief for the national insurance surcharge, but the right hon. Gentleman, with his experience of Government, knows perfectly well that it is easier to create taxes than to abolish them. He knows that whatever their effects, if they are built into the system the fiscal consequences of moving towards their abolition are considerable. To the extent that it is possible to look at the comparative merits of different taxes, I readily concede that it would assist British industry if it were possible to abolish the national insurance surcharge.

Mr. Shore: I have held no particular brief for the national insurance surcharge at any stage. The essence of the debate is the competitiveness and cost of British industry, which has declined by 40 per cent. in the last two years. But following the depreciation of the pound we were in an extremely competitive situation when the previous Chancellor introduced the tax. Therefore, there is a difference. We are not talking about a petty matter. There is now a major difference in the competitiveness of British industry—a 40 per cent. loss.

Mr. Brittan: That is what the right hon. Gentleman said at the beginning of the debate. However, I pointed to my right hon. and learned Friend's general economic strategy and talked about the consequences if the right hon. Gentleman's recipe for disaster was ever inflicted on the British people. I am now referring to the inherent defects of the tax as well as the structural defects and disadvantages which the right hon. Gentleman has found to be new, although he cheerfully sat as a member of the Government who introduced it.
If we were in a position to give further assistance to British industry, the national insurance surcharge reduction would be a strong candidate for action. To that extent I accept the case. Obviously, the priorities would have to be considered when the time arose. However, in


this year's Budget my right hon. and learned Friend rightly took the view that the first priority for giving assistance to British industry was to have a fiscal and monetary framework in which it was possible for interest rates responsibly to be allowed to fall. That is what happened. My right hon. and learned Friend took other steps, such as the stock relief measures, to give direct assistance to British industry.
Within the context of the essential Budget judgment made by my right hon. and learned Friend it is not possible to commend the new clause to the House.

Mr. Richard Wainwright: rose—

Mr. Brittan: I have sat down.

Mr. Robert Sheldon: We did not hear the word "monetarism" from the Chief Secretary, a Minister in a Government committed to monetarism. They base themselves entirely on its doctrines, but for the first time we have had such a debate without hearing about some of the essential philosophy underlying the Government's actions so far.
The Government will have to reconstruct their policies. The right hon. and learned Gentleman was unwise, and not at all far-seeing, when he said "We cannot spend our way out of this recession." I think that that will happen as a result of actions taken by the present Chancellor or by whoever replaces him.
The Government, who placed so many hopes on monetarism, expected that there would be what my hon. Friend the Member for Batley and Morley (Mr. Woolmer) called enterprise. They thought that incentives would produce great results. The Conservatives believed that by controlling the money supply the rational expectations of trade unions would lead to the kind of pay settlements that had not been possible in the past. They believed that there would be more realism, more real employment and eventually the recovery of our nation.
The beauty of the system that the Government introduced was, they believed, that there would be no messy involvement in incomes policy. Monetary policy itself would force the trade unions to settle sensibly, and cash limits would force the Government's own employees to do the same. It is clear that the Government's policies have failed to control even the settlements within the Civil Service.
So far from leading to the recovery that the Chief Secretary said would come as surely as day follows night—I am not sure why he chose that expression; it seems to be much more a case of night following day, but perhaps he did not like that thought—the Government's policies have brought about record bankruptcies. They have also resulted in the irrecoverable loss of some of our

most important industries, the lack of which we shall feel in the years to come, anger caused by unemployment, and turmoil in our streets.
The retreat from monetarism is being accepted even in the august columns of the Financial Times and The Times. Even Sam Brittan, in a late recantation, looks forward to a merger of some of the views of Keynes and Friedman. It is a bit late in the day to look for that. The Times asked in a leader
Where are we going?
and an adjoining article said that the world's bankers were asking why monetarism had failed. We see a change among the Government's strongest supporters.
The reason has been given by my right hon. Friend the Member for Stepney and Poplar (Mr. Shore). It is that the value of the pound has contributed to our industry's 40 per cent. loss of competitiveness. Combined with high interest rates, that has created difficulties for industry at home. We have had the worst of both worlds. Instead of restriction at home forcing industry to export, which is what normally happens when there is deflation, the high level of the pound has meant restriction overseas as well. We have throttled industry, denying it home and export markets and allowing it to face overseas competition at subsidised rates because of the level of the pound brought about by this Government.
When the national insurance surcharge was introduced in 1976 it was a temporary tax. As my right hon. Friend said, the balance of trade was improving then. We have declined from what was then an extremely good level of competitiveness. The surcharge is not a tax that I like. I always compare it with VAT. It has some similar characteristics.

Mr. Brittan: If it was a temporary tax, when was it planned to abolish it?

Mr. Sheldon: The surcharge was clearly introduced in 1976 as a temporary tax. If the right hon. and learned Gentleman had taken an interest in such things at the time, he would have known the reasons for its introduction. However, he was concerned with other matters and perhaps he was not aware that agreements with the trade unions were being negotiated and consequently there were certain advantages in introducing the surcharge in that way—

Mr. Brittan: Answer the question.

Mr. Sheldon: The right hon. and learned Gentleman is interrupting from a sedentary position, although he condemned almost every one of my hon. Friends for doing the same thing. If he wishes to intervene, he will probably know that I am more willing to give way than he usually is.

Mr. Brittan: I wished to make the same point. I sought to repeat it from a sedentary position in order to remind the right hon. Gentleman that I had asked him when the previous Labour Government intended to abolish the surcharge.

Mr. Sheldon: I answered the right hon. and learned Gentleman. If he had been listening instead of interrupting from a sedentary position, he would have heard that I said that the surcharge was introduced temporarily in 1976. The Government have kept it for two and a half years, although they said that they did not like it either. However, demand can now be increased. We can now give some assistance to industry. I wonder whether the right hon. and learned Gentleman listens to the representations made to him by industry.
Earlier this year, the columns of The Times contained a letter from the CBI. The letter refers to the surcharge and states:
It raises costs overall, it infiltrates into all prices … Our calculations suggest that of the total NIS burden on the private sector and the public corporations, taken together, over 70 per cent. is now accounted for by business … from manufacturing to constructing, from tourism to distribution and many more. A two per cent. cut in the charge"—
we are asking only for a 1 per cent. Cut—
could mean a balance of payments improvement, lower retail prices, and within two years perhaps 200,000 more jobs; most important of all, an improvement in profit levels and a consequent impact on investment. Other Budgetary measures to help industry, such as a cut in the fuel oil duty and some measures to ease the burden of rates—both high on the list of CBI priorities—would be no substitute for imaginative action on the NIS.
The Chief Secretary has failed to respond to that point. The national insurance surcharge is a charge on exports, not on imports. It makes exports dearer and imports cheaper. There are also consequences in terms of cash flow. The revenues from North Sea oil are not benefiting British industry. The money from North Sea oil is largely going overseas for investment, while factories in Britain close. Part of the money also goes into unemployment pay. As time goes on and as unemployment increases, the right hon. and learned Gentleman will see more and more of the revenue from North Sea oil go into unemployment pay.
At present, unemployment pay is greater than the revenues from North Sea oil. That is the magnitude of the problem. Many years ago we had great hopes and expectations about what we would do with the enormous advantage of North Sea oil. If anyone had thought that we would squander that wealth—not by frittering it away on consumer goods alone, but by keeping people unemployed—he would have concluded that it would be impossible to have such a Government. However, we have such a Government and we shall vote against them.

Question put, That the clause be read a Second time:

The House divided: Ayes 216, Noes 292.

Division No. 269]
[9.40 pm


AYES


Adams, Allen
Callaghan, Jim (Midd't'n &amp; P)


Allaun, Frank
Campbell, Ian


Anderson, Donald
Campbell-Savours, Dale


Archer, Rt Hon Peter
Canavan, Dennis


Ashley, Rt Hon Jack
Cant, R. B.


Ashton, Joe
Carter-Jones, Lewis


Atkinson, N.(H'gey,)
Clark, Dr David (S Shields)


Bennett, Andrew(St'kp't N)
Cocks, Rt Hon M. (B'stol S)


Bidwell, Sydney
Cohen, Stanley


Booth, Rt Hon Albert
Coleman, Donald


Boothroyd, Miss Betty
Concannon, Rt Hon J. D.


Bottomley, Rt Hon A.(M'b'ro)
Conlan, Bernard


Bray, Dr Jeremy
Cook, Robin F.


Brown, Hugh D. (Provan)
Cowans, Harry


Brown, Ron (E'burgh, Leith)
Cox, T. (W'dsw'th, Toot'g)


Callaghan, Rt Hon J.
Craigen, J. M.





Crowther, J. S.
Lestor, Miss Joan


Cryer, Bob
Lewis, Arthur (N'ham NW)


Cunningham, G. (Islington S)
Lewis, Ron (Carlisle)


Cunningham, Dr J. (W'h'n)
Litherland, Robert


Dalyell, Tam
Lofthouse, Geoffrey


Davidson, Arthur
Lyon, Alexander (York)


Davies, Rt Hon Denzil (L'lli)
Lyons, Edward (Bradf'd W)


Davies, Ifor (Gower)
Mabon, Rt Hon Dr J. Dickson


Davis, Clinton (Hackney C)
McCartney, Hugh


Davis, T. (B'ham, Stechf'd)
McDonald, Dr Oonagh


Deakins, Eric
McElhone, Frank


Dean, Joseph (Leeds West)
McKay, Allen (Penistone)


Dempsey, James
McKelvey, William


Dewar, Donald
MacKenzie, Rt Hon Gregor


Dixon, Donald
McMahon, Andrew


Dobson, Frank
McNally, Thomas


Dormand, Jack
McNamara, Kevin


Douglas-Mann, Bruce
McTaggart, Robert


Dubs, Alfred
Magee, Bryan


Duffy, A. E. P.
Marshall, D(G'gow S'ton)


Dunn, James A.
Marshall, Dr Edmund (Goole)


Dunwoody, Hon Mrs G.
Marshall, Jim (Leicester S)


Eadie, Alex
Martin, M(G'gow S'burn)


Eastham, Ken
Mason, Rt Hon Roy


Edwards, R. (W'hampt'n S E)
Maxton, John


Ellis, R. (NE D'bysh're)
Maynard, Miss Joan


Ellis, Tom (Wrexham)
Mellish, Rt Hon Robert


English, Michael
Mikardo, Ian


Ennals, Rt Hon David
Millan, Rt Hon Bruce


Evans, loan (Aberdare)
Mitchell, Austin (Grimsby)


Evans, John (Newton)
Mitchell, R. C. (Soton Itchen)


Ewing, Harry
Morris, Rt Hon A. (W'shawe)


Faulds, Andrew
Morris, Rt Hon C. (O'shaw)


Field, Frank
Morris, Rt Hon J. (Aberavon)


Fitch, Alan
Moyle, Rt Hon Roland


Fletcher, Ted (Darlington)
Newens, Stanley


Foot, Rt Hon Michael
Oakes, Rt Hon Gordon


Ford, Ben
Ogden, Eric


Forrester, John
O'Halloran, Michael


Foster, Derek
O'Neill, Martin


Foulkes, George
Orme, Rt Hon Stanley


Fraser, J. (Lamb'th, N'w'd)
Palmer, Arthur


Freeson, Rt Hon Reginald
Parker, John


Freud, Clement
Pavitt, Laurie


Garrett, John (Norwich S)
Pendry, Tom


George, Bruce
Powell, Raymond (Ogmore)


Ginsburg, David
Prescott, John


Golding, John
Price, C. (Lewisham W)


Graham, Ted
Radice, Giles


Grant, George (Morpeth)
Rees, Rt Hon M (Leeds S)


Grant, John (Islington C)
Richardson, Jo


Hamilton, James (Bothwell)
Roberts, Albert (Normanton)


Hardy, Peter
Roberts, Ernest (Hackney N)


Harrison, Rt Hon Walter
Roberts, Gwilym (Cannock)


Hart, Rt Hon Dame Judith
Robertson, George


Hattersley, Rt Hon Roy
Robinson, G. (Coventry NW)


Haynes, Frank
Rooker, J. W.


Healey, Rt Hon Denis
Roper, John


Hogg, N. (E Dunb't'nshire)
Ross, Stephen (Isle of Wight)


Holland, S. (L'b'th, Vauxh'll)
Rowlands, Ted


Home Robertson, John
Ryman, John


Homewood, William
Sandelson, Neville


Hooley, Frank
Sever, John


Howell, Rt Hon D.
Sheldon, Rt Hon R.


Howells, Geraint
Shore, Rt Hon Peter


Huckfield, Les
Silkin, Rt Hon J. (Deptford)


Hughes, Robert (Aberdeen N)
Silkin, Rt Hon S. C. (Dulwich)


Hughes, Roy (Newport)
Silverman, Julius


Janner, Hon Greville
Skinner, Dennis


Jay, Rt Hon Douglas
Snape, Peter


John, Brynmor
Soley, Clive


Johnson, James (Hull West)
Spearing, Nigel


Johnson, Walter (Derby S)
Spriggs, Leslie


Jones, Rt Hon Alec (Rh'dda)
Stewart, Rt Hon D. (W Isles)


Jones, Barry (East Flint)
Stoddart, David


Jones, Dan (Burnley)
Stott, Roger


Kerr, Russell
Strang, Gavin


Kilroy-Silk, Robert
Summerskill, Hon Dr Shirley


Leadbitter, Ted
Taylor, Mrs Ann (Bolton W)


Leigh ton, Ronald
Thomas, Jeffrey (Abertillery)






Thomas, Dr R. (Carmarthen)
Whitlock, William


Tilley, John
Wigley, Dafydd


Tinn, James
Willey, Rt Hon Frederick


Torney, Tom
Williams, Rt Hon A.(S'sea W)


Urwin, Rt Hon Tom
Wilson, Gordon (Dundee E)


Varley, Rt Hon Eric G.
Wilson, William (C'try SE)


Wainwright, E.(Dearne V)
Winnick, David


Wainwright, R.(Colne V)
Woodall, Alec


Walker, Rt Hon H.(D'caster)
Woolmer, Kenneth


Watkins, David
Young, David (Bolton E)


Weetch, Ken



Welsh, Michael
Tellers for the Ayes:


White, J. (G'gow Pollok)
Mr. Frank R. White and


Whitehead, Phillip
Mr. George Morton.




NOES


Adley, Robert
du Cann, Rt Hon Edward


Aitken, Jonathan
Dunlop, John


Alexander, Richard
Dunn, Robert (Dartford)


Amery, Rt Hon Julian
Durant, Tony


Ancram, Michael
Dykes, Hugh


Arnold, Tom
Eden, Rt Hon Sir John


Aspinwall, Jack
Edwards, Rt Hon N. (P'broke)


Atkins, Rt Hon H.(S'thorne)
Eggar, Tim


Atkins, Robert(Preston N)
Emery, Peter


Atkinson, David (B'm'th,E)
Eyre, Reginald


Baker, Nicholas (N Dorset)
Fairgrieve, Russell


Banks, Robert
Faith, Mrs Sheila


Beaumont-Dark, Anthony
Farr, John


Bendall, Vivian
Fell, Anthony


Bennett, Sir Frederic (T'bay)
Fenner, Mrs Peggy


Benyon, W. (Buckingham)
Finsberg, Geoffrey


Best, Keith
Fisher, Sir Nigel


Bevan, David Gilroy
Fletcher, A. (Ed'nb'gh N)


Biffen, Rt Hon John
Fletcher-Cooke, Sir Charles


Biggs-Davison, Sir John
Fookes, Miss Janet


Blackburn, John
Forman, Nigel


Blaker, Peter
Fowler, Rt Hon Norman


Body, Richard
Fox, Marcus


Bonsor, Sir Nicholas
Fraser, Rt Hon Sir Hugh


Boscawen, Hon Robert
Fraser, Peter (South Angus)


Bottomley, Peter (W'wich W)
Gardiner, George (Reigate)


Bowden, Andrew
Gardner, Edward (S Fylde)


Boyson, Dr Rhodes
Garel-Jones, Tristan


Braine, Sir Bernard
Glyn, Dr Alan


Bright, Graham
Goodhart, Philip


Brinton, Tim
Goodhew, Victor


Brittan, Rt Mon Leon
Good lad, Alastair


Brotherton, Michael
Gorst, John


Brown, Michael(Brigg &amp; Sc'n)
Gow, Ian


Browne, John (Winchester)
Gower, Sir Raymond


Bruce-Gardyne, John
Grant, Anthony (Harrow C)


Bryan, Sir Paul
Gray, Hamish


Buchanan-Smith, Rt Hon A.
Greenway, Harry


Buck, Antony
Grieve, Percy


Bulmer, Esmond
Griffiths, Peter Portsm'th N)


Burden, Sir Frederick
Grist, Ian


Butcher, John
Grylls, Michael


Butler, Hon Adam
Gummer, John Selwyn


Cadbury, Jocelyn
Hamilton, Hon A.


Carlisle, John (Luton West)
Hamilton, Michael (Salisbury)


Carlisle, Kenneth (Lincoln)
Hampson, Dr Keith


Carlisle, Rt Hon M. (R'c'n)
Hannam, John


Chalker, Mrs. Lynda
Haselhurst, Alan


Chapman, Sydney
Hayhoe, Barney


Churchill, W. S.
Heddle, John


Clark, Sir W. (Croydon S)
Henderson, Barry


Clarke, Kenneth (Rushcliffe)
Heseltine, Rt Hon Michael


Clegg, Sir Walter
Hicks, Robert


Cockeram, Eric
Higgins, Rt Hon Terence L.


Colvin, Michael
Hogg, Hon Douglas (Gr'th'm)


Cope, John
Holland, Philip (Carlton)


Cormack, Patrick
Hooson, Tom


Corrie, John
Howe, Rt Hon Sir Geoffrey


Cranborne, Viscount
Howell, Rt Hon D. (G'ldf'd)


Critchley, Julian
Howell, Ralph (N Norfolk)


Crouch, David
Hunt, David (Wirral)


Dean, Paul (North Somerset)
Hunt, John (Ravensbourne)


Dickens, Geoffrey
Hurd, Hon Douglas


Douglas-Hamilton, Lord J.
Irving, Charles (Cheltenham)





Jenkin, Rt Hon Patrick
Pawsey, James


Jessel, Toby
Percival, Sir Ian


Johnson Smith, Geoffrey
Pink, R. Bonner


Jopling, Rt Hon Michael
Pollock, Alexander


Joseph, Rt Hon Sir Keith
Prentice, Rt Hon Reg


Kaberry, Sir Donald
Price, Sir David (Eastleigh)


Kellett-Bowman, Mrs Elaine
Prior, Rt Hon James


Kershaw, Sir Anthony
Proctor, K. Harvey


Kimball, Sir Marcus
Pym, Rt Hon Francis


King, Rt Hon Tom
Raison, Timothy


Kitson, Sir Timothy
Rathbone, Tim


Knight, Mrs Jill
Rees, Peter (Dover and Deal)


Knox, David
Rees-Davies, W. R.


Lamont, Norman
Renton, Tim


Lang, Ian
Rhodes James, Robert


Langford-Holt, Sir John
Rhys Williams, Sir Brandon


Latham, Michael
Ridley, Hon Nicholas


Lawrence, Ivan
Ridsdale, Sir Julian


Lawson, Rt Hon Nigel
Rifkind, Malcolm


Lee, John
Roberts, M. (Cardiff NW)


Lennox-Boyd, Hon Mark
Roberts, Wyn (Conway)


Lester, Jim (Beeston)
Rossi, Hugh


Lewis, Kenneth (Rutland)
Rost, Peter


Lloyd, Ian (Havant &amp; W'loo)
Royle, Sir Anthony


Lloyd, Peter (Fareham)
Sainsbury, Hon Timothy


Loveridge, John
St. John-Stevas, Rt Hon N.


Luce, Richard
Scott, Nicholas


Lyell, Nicholas
Shaw, Giles (Pudsey)


Macfarlane, Neil
Shelton, William (Streatham)


MacGregor, John
Shepherd, Colin (Hereford)


MacKay, John (Argyll)
Shepherd, Richard


Macmillan, Rt Hon M.
Shersby, Michael


McNair-Wilson, M. (N'bury)
Silvester, Fred


McNair-Wilson, P. (New F'st)
Sims, Roger


McQuarrie, Albert
Skeet, T. H. H.


Madel, David
Speed, Keith


Major, John
Speller, Tony


Marland, Paul
Spence, John


Marlow, Tony
Spicer, Jim (West Dorset)


Marshall, Michael (Arundel)
Spicer, Michael (S Worcs)


Marten, Rt Hon N. (Banbury)
Sproat, Iain


Mates, Michael
Squire, Robin


Mather, Carol
Stainton, Keith


Maude, Rt Hon Sir Angus
Stanbrook, Ivor


Mawby, Ray
Stanley, John


Mawhinney, Dr Brian
Steen, Anthony


Maxwell-Hyslop, Robin
Stevens, Martin


Mayhew, Patrick
Stewart, Ian (Hitchin)


Mellor, David
Stewart, A.(E Renfrewshire)


Miller, Hal (B'grove)
Stokes, John


Mills, Iain (Meriden)
Stradling Thomas, J.


Mills, Peter (West Devon)
Tapsell, Peter


Miscampbell, Norman
Taylor, Teddy (S'end E)


Moate, Roger
Temple-Morris, Peter


Monro, Hector
Thatcher, Rt Hon Mrs M.


Montgomery, Fergus
Thomas, Rt Hon Peter


Moore, John
Thompson, Donald


Morgan, Geraint
Thorne, Neil (Ilford South)


Morris, M, (N'hampton S)
Thornton, Malcolm


Morrison, Hon C. (Devizes)
Townend, John (Bridlington)


Morrison, Hon P. (Chester)
Townsend, Cyril D, (B'heath)


Mudd, David
Trippier, David


Murphy, Christopher
Trotter, Neville


Myles, David
van Straubenzee, Sir W. R.


Neale, Gerrard
Vaughan, Dr Gerard


Needham, Richard
Viggers, Peter


Neubert, Michael
Waddington, David


Newton, Tony
Wakeham, John


Normanton, Tom
Waldegrave, Hon William


Nott, Rt Hon John
Walker, B. (Perth)


Onslow, Cranley
Wall, Sir Patrick


Oppenheim, Rt Hon Mrs S.
Ward, John


Page, John (Harrow, West)
Warren, Kenneth


Page, Rt Hon Sir G. (Crosby)
Watson, John


Page, Richard (SW Herts)
Wells, John (Maidstone)


Parkinson, Cecil
Wells, Bowen


Parris, Matthew
Wheeler, John


Patten, Christopher (Bath)
Whitelaw, Rt Hon William


Patten, John (Oxford)
Whitney, Raymond


Pattie, Geoffrey
Wickenden, Keith






Winterton, Nicholas



Wolfson, Mark
Tellers for the Noes:


Young, Sir George (Acton)
Mr. Spencer Le Marchant and


Younger, Rt Hon George
Mr. Anthony Berry.

Question accordingly negatived.

New Clause 2

TAX AVOIDANCE AND EVASION

'Within 12 months of the passing of this Act the Chancellor of the Exchequer shall publish in a White Paper his assessment of the scale and nature of tax avoidance and evasion and his proposals to cleat with these problems.'.—[Mr. Robert Sheldon.]

Brought up, and read the First time.

Mr. Robert Sheldon: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to discuss the following amendments:
No. 205, in clause 31, page 19, line 36, at end insert
'except where the payee becomes resident and ordinarily resident in either the Channel Islands or the Isle of Man during the same year of assessment as the payment is made, the sum shall remain £10,000'.
No. 201, in clause 69, page 62, line 11, at end insert
'except in so far as subsection (2) below applies'.
No. 202, in clause 69, page 62, line 14, at end insert
'except in so far as the said sections may still operate to require every employer to make a return and deliver it to the inspector, if that employer carries on a trade or business, either itself or by one or more subsidiary or associated companies, where its activities in the Isle of Man or Channel Isles attributes at least 10 per cent. of its gross profit or turnover'.
No. 203, in clause 81, page 72, line 22, at end insert
'such particulars shall include
(a) details of periods of residence of trustees and beneficiaries within the Isle of Man or the Channel Islands during the lifetime of that trust, and
(b) details of any settled property which is located in these Islands.'
No. 166, in clause 91, page 80, line 36, at end insert
'and this paragraph shall not apply to any assessments made for any year, where the transferor ceases to be domiciled in the United Kingdom by virtue of becoming domiciled in the Channel Islands or the Isle of Man.'.

Mr. Sheldon: We have tabled the new clause because we are concerned about the difference in attitude between the present Government and the Labour Government. A number of cases have highlighted the differences between the two sides of the House. We thought it right to draw attention to this essential distinction in our attitudes by tabling the new clause.
The matter does not start with the coming to office of the present Government. It stems from a previous period when, as a result of a number of avoidance devices, we sought to reach all-party agreement on a number of these matters. Since both sides of the House have a common concern about the necessity for raising revenue and for trying to show ourselves as being fair to all taxpayers whatever their position and income and whatever the amount of tax that they pay, one might have expected general agreement—on certain aspects, at any rate—concerning the increasingly important aspects of tax avoidance and evasion.
What brought this matter to our immediate concern stems very largely from the Vestey v. Commissioners of Inland Revenue case in 1979. Although that took place then, we knew much more about it as a result of The Sunday Times investigation in October 1980. As a result

of that newspaper's deep examination of a number of aspects of the matter, it was shown that over a period of 60 years the Vestey company had been able to avoid paying tens of millions of pounds in income tax.
That matter may not have brought about a division between the two sides of the House. What lent particular colour and interest to our different approaches was the response of Lord Thorneycroft, the chairman of the Conservative Party, when he said:
I would not criticise the Vestey family. Good luck to anybody who can make a success of business.
I do not think that that was the sort of commendation that anyone engaged in tax avoidance on that scale ought to have received. The matter should have received, if not disapproval, at least outright condemnation. It was the failure to condemn that sort of approach which we saw upstairs in Committee. These were not matters of morality—to quote approximately the words of the Minister of State. That is what has caused us to table the new clause.
We know the results of the activities of the 'Vestey family, from their purchase of a peerage from Lloyd George in 1922—I believe that about £20,000 was paid for the peerage—to the creation of these offshore trusts. This is only one example of a number of cases that need to be examined if we are to achieve what we seek—fairness and reasonable comparison between the burden of taxation on the well-to-do and the burden on those who have little choice in the matter.
I referred earlier to the problems that faced the Labour Party when in Government, following the Rossminster case, when hundreds of millions of pounds of tax was being avoided by means of various devices. The burden of taxation on some people was avoided completely; it was unacceptable to see hundreds of millions of pounds flowing through the hands of the Revenue. There was no question but that, in order to maintain the dignity and the rightness of the taxation system, some action had to be taken, even to the extent of backdating the action by the Inland Revenue to the date of the use of the device. Some of these matters were discussed by the Labour Government with the then Opposition. We sought to obtain agreement about how these matters should be handled. It would have been much to the advantage of the House and of the Administration if we had been able to reach some agreement for acting in a uniform way. Unfortunately, that was not possible. I hope that those discussions might be reopened.
Undoubtedly schedule E taxpayers feel at an increasing disadvantage compared with those fortunate enough to be on schedule D whose expenses are allowable in many cases. Those on schedule D also have the ability to pay in depreciated pounds at a time of inflation many months later and the ability to negotiate certain assessments of their profits. This compares with the schedule E taxpayer whose tax is removed from him before his pay is received.
The Government proposed to end tax evasion by the simple method of reducing the burden of taxation. That proposal did not get far. They did not reduce taxation very much. Even though there was a reduction, one would need to be an acute observer to detect any difference in the level of tax morality and the decline of evasion. That is not to be seen. Those are two fundamental aspects of the problem of evasion and avoidance. It is right that the Opposition should now ask for a fresh examination by the Government


who got both these matters wrong. They failed to assess the importance of avoidance and took too rosy a view of the simplicities of ending evasion.

Sir William Clark: Will the right hon. Gentleman give way?

Mr. Sheldon: I am approaching the end of my remarks. The hon. Gentleman may care to make his own speech. We have therefore tabled this new clause, which should form the basis of a useful debate.

Mr. Richard Wainwright: I am much obliged to the Labour segment of the Opposition for giving hon. Members the opportunity to discuss this new clause. I am also obliged to the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), who had the grace to make clear that the Government of which he was a great ornament were equally at fault. The Vestey case has been going on through the lifetime of many Governments. The Government in which the right hon. Gentleman was Financial Secretary did not succeed in exposing or stopping the Vestey loophole.
Having paid those genuine compliments—

Mr. Christopher Price: Will the hon. Gentleman give way?

Mr. Wainwright: It is a little early in my speech.

Mr. Price: While the hon. Gentleman, from the minute segment of the House, is on that matter, may I ask him whether he considers that he should pay a proper tribute to the media, and in particular The Sunday Times, for bringing the Vestey case to the fore?

It being Ten o'clock, the debate stood adjourned.

BUSINESS OF THE HOUSE

Ordered,

That, at this day's sitting, the Friendly Societies Bill may be proceeded with, though opposed, until any hour.—[Mr. Mather.]

Finance Bill

As amended (in the Committee and in the Standing Committee), again considered.

Question again proposed, That the clause be read a Second time.

Mr. Price: Does not the hon. Gentleman, who represents an important but comparatively modest segment of the House, think that, as Government after Government failed to plug the gap, he should pay due tribute to the media for having brought it to light?

Mr. Wainwright: I shall continue to make my own speech in my own way. The Sunday Times did no less than its duty. It is not my job to congratulate newspapers on doing the job for which they are highly paid. I have a son in that profession, and I know how highly paid they are. They should do their duty and not expect to receive compliments that are artificially contrived in the House.
I shall resume my speech at the point where I was so unprofitably interrupted. Having complimented the right hon. Member for Ashton-under-Lyne, I must say that I was disappointed that he trotted out that hoary old myth that it is simply the schedule D people who fiddle the Revenue and get uncovenanted benefits. Members of that

segment of the Opposition never say anything about the quite unjustified privilege whereby the great mass of people on PAYE never have to make their returns for benefits—nor do their employers.

Mr. Robert Sheldon: Is not the hon. Gentleman aware that I mentioned the problem of benefit? If I am to respond to the hon. Gentleman—

Sir William Clark: Let us all take part. The right hon. Gentleman must not turn his back on hon. Members and the Dispatch Box.

Mr. Sheldon: If I am to respond to the hon. Gentleman, I shall have my back to you, Mr. Deputy Speaker, and that would not be in order. I am trying to keep my face towards you, which I think conforms with the rules of order, as the hon. Member for Croydon, South (Sir W. Clark), who has not been here all that long, will recall. That is only a joke. I was talking about evasion and saying that the levels of evasion were assumed to be something that could be corrected by reducing the rate of income tax.

Mr. Wainwright: The right hon. Gentleman has wholly mistaken my point. I was not talking about evasion. I was talking about the deplorable state of the law which his party has supported just as much as the other socialist party on the Government Benches, whereby the vast mass of people on PAYE, who are often represented as being the innocent martyrs of the tax system, are by law simply not investigated about their benefits. One sees little vans and lorries at the seaside every sunny weekend. Naturally, many of them are driven there perfectly legally by people who are below the P11 D limit, the declaration of benefits limit. It is humbug for hon. Members continually to say that people on PAYE are the martyrs of the tax system. I am sorry that the right hon. Gentleman ventilated the matter this evening.
Much of this tax avoidance and the enormous amount of skill that goes into the perfectly legal tax avoidance industry is due to the oppressive weight of taxation. If taxation were not so high, it would not pay people to retain enormously expensive legal and accountancy advisers to construct expensive schemes. It is not an easy job to avoid large demands of tax.
The most elaborate rituals have to be performed and the most elaborate arguments conducted with the Inland Revenue for which highly paid advisers charge elaborate fees. That is not a profitable occupation for people who want to do something with their lives. It would die down if the taxation rates were reasonable. It is, therefore, all the more regrettable that the Government's enormous promises two years ago to remove the oppressive weight of taxation, far from being honoured, have been put in reverse by aggravating the burden of taxation, which is now considerably higher than when the Government came to power.

Mr. Maxton: The House would be grateful if the hon. Member explained precisely what he means by "oppressive taxation". Is it a comparative phrase? Is he comparing Britain with other countries with the same industrial development, or something else? He should get the facts right and make clear exactly what he means.

Mr. Wainwright: If the hon. Gentleman had been listening, he would have understood that my point was that we must pitch taxation at a rate that will make it not worth


while for taxpayers to go to the enormous expense of avoiding it. That can be done, as it is in some other civilised countries.
Much synthetic indignation has been expressed in the media about the Vestey case. Nobody is to blame but the House and the usual channels which have controlled, dominated and almost extinguished the value of the House in the past 50 years and during the span of the Vestey operation. The House could have legislated to make the Vestey scheme illegal. However, the House has been so preoccupied with the zigzag nonsense of confrontation politics—the type of event that disgraces the House every Tuesday and Thursday—that parliamentarians have not given their minds to legislating against the Vestey schemes. It rests with the House and nobody else.
Having condemned our absurd parliamentary procedures, I must say that in recent years, particularly under the present Government, bad legislation has led not only to tax avoidance but to bad management of the tax service. For instance, a great blot on the hitherto good record of our Revenue service is the appallingly expensive and humiliating fiasco of the William Press case. The judge made some acerbic comments on the pre-dawn raid by 150 Revenue men on William Press officials to try to construct evidence which the learned judge said that he was not prepared to have put to the jury. The William Press case came to a humiliating end because the judge said that the evidence was so poor that he was not prepared to submit it to the jury. We have never been told the expense of that extraordinarily ill-managed episode, but I believe that it was due to bad management in the Treasury of our Revenue service.
In the famous "Mickey Mouse" case, for years derisory returns were submitted by Fleet Street employees with nonsense names. I complain of the length of time during which that was tolerated. Eventually a concordat was arranged—a rather humiliating episode where people were allowed to get away with making a mockery of the Revenue. Some self-employed people challenged that in the courts. It was said, no doubt rightly, that it had gone on for so long and had reached such an enormous size that the industry would be imperilled if at that late stage, after such negligent delay, the law was rigorously applied. Such a lapse is offensive to other employers who have been pounced on severely for defects in their administration of pay-as-you-earn.

Mr. Peter Rees: I am sure that the hon. Member would not wish to mislead himself or the House, but he will realise that whatever occurred in the Fleet Street case occurred under the previous Administration.

Mr. Wainwright: My justice and my avenging fury are even-handed. It makes little difference whether Tweedledum or Tweedledee is sitting on the Government Benches.
In this high-minded desire to investigate evasion, it is the strong hope of Liberal Members that the enthusiasm to reduce evasion shall not continue to imperil the liberties of the subject. My contention is that, under the Government, we are getting the worst of both worlds. The liberties of the subject are being more and more eroded in the search for tax collection, yet evasion and the black economy mount. Therefore, the honest citizen is getting the worst of both worlds.
I should like to remind the House of the words of Lord Wilberforce in his judgment in the Rossminster case in 1980. I shall make certain quotations from different parts of his judgment. He said:
The integrity and privacy of a man's home and of his place of business, an important human right, has, since the Second World War, been eroded by a number of statutes passed by Parliament".
He went on to say:
Examples of them are to be found in the Exchange Control Act 1947".—
I was one of the first to welcome the repeal of that Act recently—
the Finance Act 1972 (in relation to the Value Added Tax)".
Finally, Lord Wilberforce said:
A formidable number of officials now have powers to enter people's premises, and to take property away, and these powers are frequently exercised, sometimes on a large scale. Many people … think that this process has gone too far; that i1 is an issue to be debated in Parliament and in the Press.
I am glad that it is being debated in the House tonight.
I should like to put on record the strong feeling among Liberal Members, which has been expressed before, that it was a profound mistake as a matter of expediency, when perhaps the Inland Revenue was overloaded, to put VAT in the hands of Customs and Excise. It does not have the same tradition of even-handed dealing with taxpayers and their advisers which has made the history of the Inland Revenue one of the most civilised parts of tax collecting in any part of the world. It is a proper grievance of VAT taxpayers that the records that they are required to keep for VAT are perversely not the same as the records which most of them properly keep for the Inland Revenue.
The VAT system is such that in many cases it is not possible for even the best tax officer completely to reconcile a taxpayer's VAT accounts and returns with his accounts prepared for the Inland Revenue. That is a blot on our system. It results in a great deal of hardship and over-anxiety on the part of the citizen, which hon. Members know has led to a number of suicides as well as a number of serious breakdowns and a great deal of misery. It is intolerable that we should have a VAT system which does not rely on the audited records, in the proper accountancy sense, of the taxpayer.
Under VAT, a rather unsavoury campaign has been going on in official quarters to suggest that many innocent mistakes and forgivable errors are classified as fraud or attempted fraud. The amount of sheer, deliberate and wilful VAT fraud is greatly exaggerated in official quarters in support of those oppressive powers which Lord Wilberforce has so magisterially condemned. The Liberal view is that the powers of search and entry conferred by section 37 of the Finance Act 1972—the Act which Lord Wilberforce singled out for criticism—are objectionable and should be seriously modified.
10.15 pm
In supporting the Labour segment of the Opposition in the proposal that there should be a thorough study of the whole problem, I urge that that should take account of the defects of legislation, for which the House is responsible, and that it should be even-handed in its inquiry and consider the serious invasion of individual human rights that is embodied in the powers unjustifiably given to Customs and Excise when the mistaken decision was taken to entrust VAT to its hands.

Mr. Foulkes: There is a great temptation to follow some of the more outrageous remarks of the hon. Member


for Colne Valley (Mr. Wainwright) and to remind him of the period of the Lib-Lab pact when he had an opportunity to urge the Labour Government to close the Vestey loophole more tightly. I do not remember that being one of the things—

Mr. Richard Wainwright: Is the hon. Gentleman seriously suggesting that during the Lib-Lab pact any Liberal Member had access to any Government files or had the vestige of an opportunity to know what was taking place in the tax area?

Mr. Foulkes: That is an amazing revelation of ignorance. The hon. Gentleman and his colleagues did not say that closing the loophole was one of the main planks on which they bound together with the Labour Party. I am afraid that I am succumbing to the temptation that I was determined to resist. My hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton) will deal rather more decisively with the outrages perpetrated by the hon. Member for Colne Valley.

Sir William Clark: It is unfair to criticise the junior partner in the Lib-Lab pact and say that the Liberals did not do anything about tax avoidance. Why did not the hon. Gentleman's Government do something about it and tell their junior partner that that was happening?

Mr. Foulkes: I would have preferred that to happen. Had I been a member of the Government at that time, I might have done that. The hon. Member for Croydon, South (Sir W. Clark) will note that the hon. Member for Colne Valley livens up when in the Chamber. He was much quieter in Committee. When he had power within his grasp for a year or two, he had the opportunity to close the loophole, about which he feels so strongly.
I want to talk about the five amendments that are grouped with the new clause and which stand in my name. They relate to the Channel Islands and the Isle of Man. I was out of the Chamber for a short while during the previous debate. I detected, spreading around the corridors of the Palace of Westminster, the story that the Chief Secretary and his Minister were becoming a little shirty, a little ragged at the edges and a wee bit tetchy when dealing with comments from Opposition Members.
The question of tax evasion and tax avoidance is an issue on which the Opposition and the Government could unite. I should have thought that the Government, even more than the Opposition, would be anxious to ensure that they rake in the maximum amount of available revenue. After all, the Minister's war cry—I hope that the Salvation Army will excuse me for pinching that title—is "We need the money." There is nothing more appropriate for the Minister to support than the proposal that some study should be undertaken of the whole question of tax evasion and avoidance.
I thought that the Minister of State would be inclined to support, if not the specific amendments that I had tabled, at least their general drift. I hope that he will be able to indicate, if not approval of the exact proposals that I am advancing, at least approval of the general suggestions and recognition of my concern, which I hope he shares.
Amendment No. 205 deals with golden handshakes and suggests that there should be no increase in the sums set out in the relevant provisions for those who emigrate to the islands.
Amendments Nos. 201 and 202 suggest that there should be no concession on medical insurance if companies have 10 per cent. of their business on the offshore islands. Amendment No. 283 turns on the power of the Inland Revenue to get information on trust settlements. It would make it mandatory for such information to include details of any island's involvement. Finally, amendment No. 166 would prevent relief for small gifts for those who subsequently emigrate to the islands.
These are purely token amendments. In reality they mean very little. The rules of the House prevent me from tabling substantive and substantial amendments that if accepted would enable the House, the Government and the country substantially to tax United Kingdom companies which operate primarily in the United Kingdom but which are based on the Channel Islands and United Kingdom residents who go to live on the Channel Islands. Such amendments would refer directly to individuals and companies that go to the islands specifically for tax avoidance.
I have tabled these token amendments to show that there is some concern in the House. I hope that some of my hon. Friends will support me. I am concerned that a number of people and many companies are taking steps to avoid tax by basing themselves on the islands. I hope to obtain some specific information from the House. Last week I tabled a series of questions to the Chancellor of the Exchequer. I regret that the questions have not yet been answered. I received the usual holding reply to tell me that my questions would be answered in due course.
When that happened to me on an earlier occasion, I rather aggressively attacked the Minister of State in Committee. I said that I thought that he was witholding information so that it would not be before the Committee when the issue was discussed. He replied with a touch of annoyance and with some indignation in his voice that the Government could not be accused of doing such a thing and that he wanted only to answer my questions properly. In the event, my questions were not answered extensively. My suspicious nature leads me again to believe that ultimately I shall not recieve extensive and valuable answers to the questions that I tabled last week. Again, I am not getting the information that I asked for in time for the debate.
I wanted to know and to be able to tell the House how many individuals and companies have moved to the tax jurisdictions of the Channel Islands and the Isle of Man. I wanted information on comparative tax levels on the islands and in the United Kingdom. I wanted details of the outflow of funds following the ending of exchange control. I was especially interested to know how much money had gone to the Isle of Man and the Channel Islands. I wanted to know how many companies had registered on the Channel Islands and the Isle of Man that have trade in the United Kingdom and what proportion of them have 50 per cent. of their turnover in the United Kingdom and what proportion have 50 per cent. of their profits in the United Kingdom. I wanted information about the contribution to the common services and to the defence of the United Kingdom that we receive from the Isle of Man.
Lastly, I asked the Chancellor whether he would introduce legislation to make United Kingdom citizens who are living on the Isle of Man and Channel Islands liable to United Kingdom tax. I have had holding replies to all these questions. Surely the Chancellor of the Exchequer could have given an indication of the Government's intentions in answer to my final question. I hope that the hon. and learned Gentleman will do so tonight.
It may seem outrageous to suggest that the islands, which are under the British Crown but for which we do not have direct legislative responsibility, should be made subject to Westminster legislation to deal with the issues that cause me concern. I quote from no less an expert than the hon. Member for Tiverton (Mr. Maxwell-Hyslop) in The Financial Times on 6 July 1978:
For Westminster to impose legislation, particularly tax legislation, or, persons who were normally domiciled in the UK, but who have taken up tax-residence hopefully in the Channel Islands, constitutes no novelty of principle and no constitutional outrage.
A Conservative Member and an acknowledged constitutional expert says that there would be no constitutional outrage whatever.
I should make it clear that in making this suggestion I am in no way attacking or wishing to impugn or legislate for natural-born Manxmen or Channel Islanders; I am concerned only with people avoiding due contribution to United Kingdom tax and companies avoiding responsibility in this country by using the haven of the Channel Islands and the Isle of Man, and I am attacking the system which encourages these tax exiles.
Tax scroungers of this kind are far more damaging to the United Kingdom Exchequer and economy than alleged social security scroungers. It is about time the House took note of that. Those islands have been for some time and are becoming even more a paradise for the very rich. There are 150 millionaires in the 45 square miles of Jersey. The Channel Islands have no value added tax, no gift or wealth tax and very limited capital gains tax, on certain properties only.
If our Inland Revenue wishes to pursue companies or individuals on the Isle of Man, for example, it has no power to obtain information on Isle of Man bank records, as was apparent from a recent High Court case.
Ministers argued the case in Committee about getting information about bank records for tax purposes. When companies are registered on the Isle of Man, there is no power for the Inland Revenue to obtain information.
For individuals on the Channel Islands, earnings of £100,000 which under the United Kingdom tax system would be reduced to £20,000 are cut to only £80,000. That is a huge advantage for those individuals, many if not all of whom have made their money in the United Kingdom. Many of the companies are still making their money in the United Kingdom. Yet by going to live or by registering their companies in the Channel Islands or the Isle of Man, these people provide no return to the community from which they gained their money in the first place.
The many individuals include Tony Jacklin, the late Sir Billy Butlin, Alan Whicker and Jack Higgins, author of "The Eagle has Landed"—it was suggested to me that "The Bird has Flown" might be more appropriate—as well as Robert Sangster of Vernons Pools, who certainly makes his money from ordinary punters in the United Kingdom.

Then there is Lord Brookes of GKN. All that money, including contributions to Conservative Party funds, derives from the United Kingdom.

Mr. Richard Wainwright: Does the hon. Gentleman agree that in the light of what has happened to GKN under the Conservative Government, its enormous contributions to the Conservative Party in the past must have been made out of sheer altruism?

Mr. Foulkes: Whether it was altruism or not, it was certainly misguided. However, I shall not pursue that, as it is not strictly relevant to the debate. Nevertheless, it is a very good point.
Finally, among these few examples of tax dodgers, who are far more disadvantageous to this country than any poor old widow who may get a little extra by mistake and then be persecuted as a result, the last of the catalogue is Kevin Keegan, who registered two companies on the Isle of Man to take care of the money he has made from our football system.
Tax avoidance is the main reason why companies register in the Channel Islands and Isle of Man. They also go there to avoid other United Kingdom legislation. We saw that only too tragically in the case of the divers who were killed on the offshore workings in the North Sea. They were employed not directly by the company registered in the United Kingdom as the operator but by an offshore company registered in one of those islands.
Many of these companies register in the Isle of Man and the Channel Islands not merely to avoid tax but to avoid some of the employment and health and safety at work legislation passed by this Parliament.
The number of overseas trading companies registered in Jersey rose by 150 per cent. between 1975 and 1979. A total of 15,000 companies are registered in Jersey, and I am sure that an answer from the Minister would reveal that most, if not all, operated in the United Kingdom.

Mr. Anthony Beaumont-Dark: Does not the hon. Gentleman agree that one of the great problems faced by such people under the last Labour Government was that £92 out of every £100 they earned was confiscated? I do not believe that these people have run off merely for the sake of money. Does the hon. Gentleman not think it unfair of the State to take £92 out of every £100 that someone has earned?

Mr. Foulkes: The hon. Gentleman may well have advised people to avoid their dual responsibility to United Kingdom taxation, but these companies made the money in the United Kingdom and it would be patriotic if they gave it to the United Kingdom taxpayer so that it could be spent to build up our social and education services. I therefore believe that that is their patriotic duty and responsibility.

Mr. Beaumont-Dark: Utter rubbish.

Mr. Foulkes: Instead, these companies are avoiding their responsibility. They are scuttling off to the Isle of Man and the Channel Islands, which are taking advantage of it. They are encouraging it. Recently, the Isle of Man rushed through the Tynwald the Exempt Insurance Bill, which exempts the investment income of insurance companies from tax. That is designed to to make the Isle of Man the Mecca for insurance companies.
Guernsey already does that. Bermuda is the world leader, but the Isle of Man and the Channel Islands are setting themselves up as rivals to Bermuda and the Cayman Islands.
We are more concerned about these offshore islands of the United Kingdom setting themselves up as tax havens than we are about islands in the Caribbean. As well as paradise islands for the very rich, they are parasite islands because they live off the United Kingdom in other ways.
The Channel Islands make no contribution to the defence of the United Kingdom. The Isle of Man makes a voluntary contribution, which according to the figures I have been able to get is about £500,000. Yet in a written answer in 1979 it was estimated that, on the basis of the contribution per head of population, the Isle of Man's contribution should be £7·8 million. Therefore, these islands really get their defence on the cheap.
The islands also get political stability as part of the United Kingdom network, although they are not technically members. Residents there get United Kingdom passports and are able to travel the world as United Kingdom citizens and get all the benefit of United Kingdom citizenship. They receive all these benefits and many more without contributing substantially to the United Kingdom Revenue—indeed, at the same time as drawing off substantial sums from the United Kingdom Revenue.
It has been estimated that in 1979 the United Kingdom taxpayer lost £100 million as a result of the activities of the Isle of Man and the Channel Islands. That was a conservative estimate, and it must now be substantially more.
I hope that we shall have a clear and unequivocal statement that the Government, who are prepared to buy binoculars for social security spies to look for the poor lady or unemployed person who may be receiving a little too much in benefit, will be equally, if not more, vigilant in regard to those who go to offshore islands to avoid paying United Kingdom tax.

Mr. Maxton: It is difficult to follow the expertise and eloquence of my hon. Friend the Member for South Ayrshire (Mr. Foulkes), who has clealy done a great deal of research.
I feel sorry for the hon. Member for Colne Valley (Mr. Wainwright). Because of my hon. Friend's statement that I would respond to the hon. Gentleman's speech, he has felt obliged to stay here until I was called. I am sure that he is grateful to you, Mr. Deputy Speaker, for calling me before my hon. Friend the Member for Workington (Mr. Campbell-Savours).
The hon. Gentleman's speech was agreeable in a variety of ways. One of his new-found friends, with whom I am sure he will work closely for a long time—outside the House, of course—was Chancellor of the Exchequer in a Labour Government. He had an opportunity to do something about the Vestey scandal, and should have done.
The hon. Gentleman talked about oppressive taxation. I asked him to define it, and he made no attempt to do so. I have never been able to find any figures produced by a reputable organisation to show that the people of this country suffer an oppressive tax regime compared with that of equivalent industrialised nations. We know about

the Cayman Islands, the Bahamas and even the Channel Islands and the Isle of Man, but compared with other Western industrial nations we are not overtaxed. It is time we destroyed that myth.

Mr. John Townend: When we had a marginal rate of tax on investment income of 98 per cent., leaving 2p in the pound for the investor, was not that oppressive taxation?

Mr. Maxton: The implication always is that the person concerned was paying 98 per cent. on all his income, which is nonsense. He did not start paying it until he was in a high income bracket, and he paid normal tax on a large part of his income. Many people never see anything like the income on which he was paying 98p in the pound. Some of us might think that even 98 per cent. was not enough.
The hon. Member for Colne Valley paid a remarkable compliment to the Conservatives calling them Socialists. At one point the hon. Gentleman accused us of going in for confrontation politics. The Daily Telegraph recently described as the "black hole" in the Social Democrat-Liberal philosophy the fact that if one does not believe in confrontation politics one ultimately believes in single-party Government.
Only two minutes later the hon. Gentleman accused us of being Tweedledum and Tweedledee. He said that we were always in confrontation. However, the next minute he said tat we were Tweedledum and Tweedledee and that we were the same. He must make up his mind whether we are the same and carry out the same policies or whether we are in perpetual confrontation.

Mr. Richard Wainwright: I have been following the hon. Gentleman's argument with fascination. However, is he not aware that confrontation was the essence of Tweedledum and Tweedledee's joint existence?

Mr. Maxton: rose—

Mr. Deputy Speaker (Mr. Bernard Weatherill): Order. The hon. Gentleman should be aware that we are discussing tax avoidance and evasion and not the speech made by the hon. Member for Colne Valley (Mr. Wainwright).

Mr. Maxton: I shall quickly return to my major point, before my hon. Friend the Member for Grimsby (Mr. Mitchell) passes me one of his usual notes about how long I have been speaking. In Committee, he had a habit of doing that.
The hon. Member for Colne Valley raised a serious point about the oppressive nature not only of taxation but of the investigations that the Inland Revenue can carry out into tax avoidance and evasion. I hope that the hon. Gentleman will intervene and make it clear that the oppressive inspectors who investigate social security fraud have greater powers than those who carry out investigations for the Inland Revenue. It gets up the nose of Labour Members and the public that the Government are willing to bend over backwards to give money to the well-off and wealthy. They will no doubt refuse to accept the new clause and to set up an inqury into tax avoidance and its extent. They will probably say that the new clause is unnecessary or that an inquiry will cost too much. However, the same Government have instituted a much more rigorous regime to investigate so-called social security frauds.
The hon. Member for Colne Valley pointed out that many of the so-called VAT frauds were honest mistakes. Many of the so-called social security frauds are also honest mistakes. Tax avoidance usually involves reasonably intelligent people who have had some education, but many of those apparently involved in social security frauds find it extremely difficult to understand the forms and the law. Many of them honestly do not know that they are committing fraud.
Recently, a woman declared her income for her husband's social security on her net, rather than her gross, earnings. That was a legitimate mistake. But for my intervention, the couple might have been brought before the court for fraud. That type of thing happens. The regime has been tightened up. We want the same strictness and harshness to apply to those who avoid taxation. Tax avoidance is an equal fraud and also takes money away from our people. All the figures show that it is a much greater problem than social security fraud and that much more money is lost. Some Conservative Members will say that paying money is is different from taking money out.

Mr. Beaumont-Dark: May I ask my hon. Friend a question? Why is it fraudulent for an author, artist or footballer to carry on his occupation in a country that has only moderate taxation? Why are you accusing them of being tax evaders when they do not wish to pay the United Kingdom's penal rates of tax because they can legally carry on their occupations elsewhere? Why are they to be pilloried by the likes of you, just because they do their work elsewhere?

Mr. Maxton: I am sure that you would do nothing like that, Mr. Deputy Speaker. I want to point out to the hon. Gentleman that I am not his hon. Friend. I have not yet considered the speech of my hon. Friend the Member for South Ayrshire, although I shall come to it in a moment.
Those people that the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) is talking about make much of their money in this country and then take advantage of and benefit from different tax laws outside this country [Interruption.] Hon. Members may say "So what?", but they are the hon. Members who, during the winter of discontent or whenever a strike is called by a trade union, accuse the trade unions of destroying the country's economy, of unpatriotic gestures and so on. Those are the hon. Members who turn a blind eye to the fact that such people earn their income here but do not pay their taxes towards the upkeep of this country.
We think that is more unpatriotic than the behaviour of unions. Indeed, I do not consider trade unions to be unpatriotic. Conservative Members cannot have it both ways. They cannot accuse trade unions of being unpatriotic in their actions and condone wealthy people taking actions to avoid the payment of taxes, because that is just as unpatriotic. It means that the country cannot afford to keep up the structure, even in defence, that Conservative Members would like to see, because large numbers of people are not paying their taxes.
I fully support what my hon. Friend the Member for South Ayrshire said about tax avoidance. The Channel Islands and the Isle of Man in nearly all respects are treated as part of the United Kingdom. They expect to be defended by the United Kingdom. Their citizens expect, as my hon. Friend said , to carry British passports and that those

benefits will be forthcoming. Countries that control their own destinies and have no connection with the United Kingdom are entitled to set up a tax haven. I should prefer to try to stop people from this country using them, but at the same time it is their independent right to do so. British offshore islands are being allowed to do that and it is time that the Government considered the matter seriously and tried to ensure that United Kingdom nationals do not use the islands as tax havens.
If the Minister is honest and wants to show that he is even-handed in his dealings not just with taxation but with the whole of our economy and welfare system, he should accept the new clause so that we can seriously consider the problem of tax avoidance.

Mr. Clive Soley: I welcome the new clause. It is long overdue. It is just over two years since the Conservative Party won the election, partly by an unscrupulous attack on the scroungers on the Department of Health and Social Security. Both my hon. Friends the Members for Glasgow, Cathcart (Mr. Maxton) and South Ayrshire (Mr. Foulkes) have pointed out that the amount involved is far less for the DHSS than for the Inland Revenue in income tax. It has been my misfortune in years past to have dealt with people who have been in prison both for tax evasion and for fraud on the DHSS. There are far fewer people in prison for tax evasion than fraud against the Department of Health and Social Security.
The wording of the clause is appropriate because it asks the Government to produce a White Paper to investigate the extent and nature of fraud. There is a case for sending people to prison for fraudulent claims or not making honest declarations of one sort or another, but there is no case for double standards. If the Conservative Party wants to get tough on law and order, it could start sending people to prison for tax evasion. That would at least make it consistent with the way in which people are treated for social security fraud.
I well remember—to the eternal shame of this country, it was not an unusual experience—seeing a woman sent to prison and her children taken into care for fraud against the Department of Health and Social Security. The sum involved in such cases seldom went above four figures and was usually about £200. But because the woman usually had three or four previous convictions, barely totalling more than a four figure sum, she ended up in prison.
In the few cases that I can remember of people coming out of prison following tax evasion sentences, they would usually say "What is wrong with it? Everybody does it. The only difference is that I was caught." There again we see the double standard that the Conservative Party is so fond of encouraging.
The problem of tax evasion is very serious. It is estimated that thousands of millions of pounds are not being collected by the Revenue as a result of avoidance and evasion. I fully acknowledge that there is a real difference between the two, and I shall say a little more about that in a minute or two.
The Conservative Party practises the politics of envy and the politics of greed. I do not know why the hon. Member for Yarmouth (Mr. Fell) is looking so surprised. If he is so angry about it, perhaps he would like to intervene. I shall gladly give way if he wishes to do so. The Conservatives then go on to wonder why, having flaunted privilege in the face of deprivation, having


encouraged envy and greed in the way that I have talked about, and having encouraged double standards, people should accuse them of undermining the very law and order that they said at the time of the general election they would do so much to reinforce.
It is the quality and the fabric of society that we are talking about. The hon. Member for Yarmouth need not shake his head. He need only ask a few of his constituents for their opinion. Nothing is more offensive to an ordinary taxpayer on PAYE than to know that people who have millions of pounds are avoiding tax in a big way. That is what encourages the politics of envy and greed and does so much damage to the fabric of society.
It cannot be denied that the biggest discrepancy in our society is not so much in terms of income but of wealth. That wealth is usually inherited, and it is in regard to inherited wealth that the worst forms of avoidance—and to some extent evasion—take place. Here we have the contrast between privilege and deprivation, and it encourages the politics of envy and of greed.
If we feel that it is fair enough to practise avoidance, we then have another problem to consider. It is understandable that a person who wants to pay as little tax as possible should employ an accountant. Recently in Committee we spent a lot of time on clause 28, which provides that a benefit officer in the DHSS can state the amount of tax that a person will have to pay. If the person concerned does not object to that statement of the amount within 60 days—before we pressed our amendment on the Government the period was 30 days—he has no right of appeal. Here again, we see the double standard operating in regard to avoidance.
Anyone who is at the top end of the scale can employ, quite properly, an accountant to advise him, and I make no complaint about that. But why do we not set up centres at which people on low incomes—even people on supplementary benefit have now been drawn into the tax net—can be advised? As my hon. Friend the Member for Cathcart has already said, people get into trouble with the Department because they do not understand the rules and regulations, they fill in the forms incorrectly, sign them, and are then investigated to see whether they have deliberately made a false declaration. Some taxpayers do that but are not investigated, and that is the double standard. We have double standards on evasion and double standards on avoidance.
An investigation into avoidance and evasion is long overdue. The amount runs into thousands of millions of pounds. It is not the petty amount of which we talk in relation to the DHSS. All Opposition Members know that the Government will reject the new clause. They will do so precisely because they will continue to do what they did in Standing Committee. They will protect privilege and increase the burden on those at the lower end of the income scale. The net result of that, combined with the results of their economic policies, will be to continue to keep unemployment high, and probably push it higher; it will continue to keep inflation high; it will continue to keep the rate of income tax in Britain high. Conservative Members were so proud of the boast that the Government would bring it down, but it is still high. The Government will continue to go in for retrospective legislation when they

think that it pays them. Above all, they will continue to undermine law and order by the double standards that they practise and preach.

Mr. Campbell-Savours: The whole House will have been disturbed by the intervention of the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark). What he was telling us was unmistakable. He was saying—and what I am about to say will be endorsed by what we shall read in Hansard tomorrow—that he was advising people to leave the United Kingdom, to pay taxes outside the United Kingdom, so as to "avoid a Labour Government". I hope that I quote him correctly. That was a most unpatriotic suggestion. [Interruption.]The hon. Member has left the Chamber. He had been upset by his own Whips. I had hoped that he would remain.
What has arisen in this debate and in previous debates since I have been a Member is that a very clear difference exists between the two sides of the House about the way to deal with this special problem. We have the view expressed by Conservatives in the country and the view expressed by Lord Thorneycroft, who made it clear that he congratulated those who sought to use the kind of loopholes that the Vesteys have been able to use over a number of years. Then we have the views expressed by Opposition Members. They are representative of the anxieties, frustrations and irritation that exist in the British Labour movement about this matter—so much so that in 1978 the national executive committee sent two people to investigate this matter in the Channel Islands. If they were here to speak tonight—although one of them is still a Member of this House—they would probably wish to draw our attention to what they found. They may well have found that there was an overall benefit to the British Exchequer, but they found that there was plainly an injustice.
I should like to draw hon. Members attention to the reality of what is going on, certainly in relation to the Isle of Man. Hon. Members will be aware of a publication in the United Kingdom called Exchange and Mart. Every week, in its financial section, there are one, two or three advertisements which advertise the services that are available on the Isle of Man to those companies on the United Kingdom mainland which seek to register their operations there or whose directors would seek to become resident in that part of the world.
I quote the advertisement in the Exchange and Mart this week in the name of CLW Management Services Ltd. It says:
Low tax area—20 per cent. No corporation tax. No capital gains tax. No capital transfer tax"—
[Interruption.] An hon. Gentleman on the Government Front Bench, a member of the Government, cheers in support of these measures, which include no taxation for those who seek to take advantage of this advertisement. I am sure that all hon. Members would deplore such an attitude, as would a great number of people.
The advertisement ends by saying:
And no need to worry.
That is the service provided by that company.
Some months ago I took it upon myself to make contact, through an intermediary, with two of these companies on the Isle of Man. I draw the attention of the House to the correspondence that came from these company-promoting outfits on the Isle of Man, trying to


attract British industrialists and British business men to set up operations there. In one of the letters, SGS Consultants Ltd. of St. George's Street, Douglas, stated:
Whilst company formation is a fairly straightforward exercise, we would appreciate your reasons for such a company so that we can arrange the correct situation for you. Please be assured that all information is treated with utmost confidentiality.
The same document states:
The Isle of Man independently controls the assessment and collection of all taxes from individuals and companies resident on the island. Relations with the UK Inland Revenue are the same as relations with any other foreign tax authority. Apart from the double taxation relief system, no information passes beween the Manx and British tax authorities.
11 pm
These people are trying to attract those in the United Kingdom by advertising in our media that they should take advantage of tax concessions. The letter from SGS Consultants Ltd. continues:
The tax saving in using an offshore company is quite considerable if used intelligently, especially in the following categories: non-residents of the United Kingdom, fee earning individuals such as entertainers, sportsmen and consultants, individuals or companies engaged in business not necessarily confined to one particular country, import or export companies, individuals or companies who are in receipt of royalties, commissions, copyright payments.
These people are almost parasitically trying to draw on those who produce and generate wealth in the United Kingdom and allow them facilities for offsetting their tax liabilities in the Isle of Man. To show their eagerness, I refer to another letter from CLW Management Services Ltd. which says
As you already know, tax avoidance is legal but also somewhat complex. If you care to telephone the undersigned, I will be pleased to enlighten you in any particular field. Ideally, if you could make a visit to the island, I will be pleased to meet you at the airport and can then discuss your personal requirements.
That is the measure of the personal service being offered to our citizens on the mainland to attract them to the Isle of Man and so enable them to reduce their tax liabilities.
I should like to ask the Minister a question. Is he aware that in Lancashire, Cheshire, the North-West and the Northern region a large number of companies have offshoots or trading relationships with companies in the Isle of Man? Many of these companies are involved in the construction industry. These companies in the Isle of Man have direct links with residents in the United Kingdom. Many of the se residents freely live on the mainland of the United Kingdom, not in the Isle of Man, although they may have sought residence there. It appears that there is no control on the movement of people between the mainland and the Isle of Man.
Last year, when I went to the Isle of Man, I was not checked upon. It seems that if people seek to take up residence there, they can still live freely in the United Kingdom without restriction. That is happening in Lancashire, Cheshire and parts of the Northern region. There has been a demand by the Opposition for a White Paper to evaluate the measure of fraud—it is fraud and not tax avoidance—to cheat the British Exchequer of money that rightfully belongs to it. We are entitled to seek a White Paper and also a statement by the Government in the light of the fact that people allow their companies to coexist with companies set up in the Isle of Man specifically for the purpose of reducing tax liability.
Is it also true that some companies invoice their services to the Isle of Man in a transfer profit-making arrangement whereby their profits, in the main, concentrate in the hands of companies that exist in the Isle of Man which they still control, or indirectly control, and thereby reduce their tax liabilty and avoid paying justifiably higher levels of tax that should be paid on the mainland of the United Kingdom?

Mr. Peter Rees: We have had a far-ranging debate, not too closely related to the subject of the new clause. [HON. MEMBERS: "Nonsense."] I hope that I shall be allowed to develop my argument. The hon. Member for Glasgow, Cathcart (Mr. Maxton) was heard in almost total silence. I do not know whether that indicated the House's appreciation of his arguments or merely tedium. I suspect that it was the latter.
Serious consideration of the subject would have been easier if the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) had been a little more analytical of the problem in his opening remarks and set the tone more precisely, because evasion and avoidance present different problems which require different measures. We appreciate that the right hon. Gentleman, in initiating the debate on the new clause, wanted to find a pretext to draw a somewhat trite distinction between the difference in attitude of the two sides of the House. It is not for me to say whether he will persuade people outside this place.
The right hon. Gentleman misquoted certain remarks of mine in Committee about the moral aspects of the matter. I said in Committee and I repeat today that I prefer riot to moralise on these matters. Politicians are not particularly attractive when they moralise. However, the right hon. Gentleman must be guided by his own taste in these matters.
Several hon. Gentlemen sought to draw the distinction between the departmental handling of fraud in social security cases and in Revenue cases.
Finally, the right hon. Gentleman sought to distinguish between schedule D and schedule E taxpayers. That matter was adequately dealt with by the hon. Member for Colne Valley (Mr. Wainwright), who, with his experience in accountancy, has perhaps a greater grasp of these matters. When the Labour Government were concerned with these matters, I do not recall that they were entirely unexercised about certain facets of the schedule E system. They required much of the House's time to consider the matter of perquisites and emoluments, which suggested to me that they thought that there was a certain scope for avoidance, if not evasion, in schedule E.
It is at least possible to conclude that those who take part in the black economy may also hold jobs at other times in the day or week, in respect of which they are assessed under schedule E. There is no hard and fast distinction between schedule D and schedule E taxpayers, and it does not advance examination of the subject to attempt to divide the country crudely on that basis and to stir up animosity between two bodies which are not clearly separate.
Evasion is a matter that must exercise any Administration. Of its very nature, it is not susceptible of precise measurement. I fail to see what the right hon. Gentleman imagines would emerge from a White Paper on the subject. We had the evidence of a former chairman of the Board of Inland Revenue, a distinguished civil servant, who has now retired to the Public Accounts Committee. He said that he thought that the black economy was


running at 7½ per cent. of the gross domestic product. That was after five years of Labour Government, which suggests that possibly the economic and social climate at that time was particularly favourable and stimulating to the black economy.
I do not attach too much significance to those figures, because I also recall—as does the right hon. Gentleman, who has clearly made a close study of these matters—that the Central Statistical Office and the Institute of Fiscal Studies have both put a lesser figure to that. No one can say with precision what the dimensions of the black economy are. Seriously to imagine that a White Paper produced after the most careful thought will advance our understanding of the problem is to misunderstand the nature of the problem.
Of course, no Government can condone evasion or avoidance. I shall list some of the measures which this Government have taken in relation to evasion. We have instituted a more in-depth examination of accounts. The Inland Revenue has intensified the audit of employers' PAYE. Sixth and seventh offices have been opened in Sheffield and Croydon. Fifty extra inspectors have been deployed on this work. Before right hon. and hon. Members are too cavalier about 50 extra inspectors, I remind the House that such trained manpower is scarce.
I remind the House, as a serious rather than a frivolous contribution, that the Government set up the Keith committee to investigate and consider the whole range of the Revenue's powers to see whether they are too excessive, rightly exercised and sufficient. That is a serious, practical and constructive contribution. We shall await with great interest the committee's report.
When I compare the previous Administration's handling of the Fleet Street case with what this Administration have done, I wonder whether Opposition Members have a serious approach to the problem. I should take the cries of anguish and moralising that we have heard in the past hour or two more seriously had I heard similar sentiments from Labour Members when the news of the Fleet Street case broke to the public. I do not recall any anguished cries then. That suggests that they must have been satisfied with the outcome. Right hon. and hon. Members are distinguished members of their party. They could have made their voices heard outside. I do not recall that they made a particular stand. I am, therefore, a little sceptical of their approach.
I turn to the question of avoidance. There is a fairly blatant streak of humbug in much of what we have heard. The right hon. Member for Ashton-under-Lyne had five years to clear his mind on the subject. He did not attempt to define what he means by avoidance and what aspects of it he finds particularly objectionable. He did not address himself to the point made by the hon. Member for Colne Valley, and pointedly by some of my hon. Friends, that avoidance is liable to flourish in a climate where the marginal rates on investment income are 98 per cent. and on earned income 83 per cent.
Human nature being what it is, that creates a climate in which people are prepared to devote a little more thought than they should to such activity rather than to more constructive pursuits. Part of this Government's policy is to try to create a tax system which is recognised to be fair so that people will not have to devote themselves to activities which are not constructive.
If right hon. and hon. Members are really concerned about the problems of avoidance and evasion, they might come out openly and tell us their considered party view on the higher rates of tax. They might also tell us whether part of their party's platform is to introduce a wealth tax.
I challenged the right hon. Member for Stepney and Poplar (Mr. Shore) on that during the Budget debate. Prudently he remained obstinately silent on that question. Does he believe in a wealth tax? If so, at what rates?

Mr. Austin Mitchell: Yes.

Mr. Rees: The hon. Member for Grimsby (Mr. Mitchell) says that he does. He is an Opposition Whip. I do not know whether he is speaking with the full-hearted consent of his two right hon. Friends, who are more prudently casting their eyes down on their papers. I do not believe that they want to be drawn on this point. I believe that the country is entitled to know. If we are to have a serious debate on avoidance and evasion, we should know where the Labour Party stands on confiscatory taxation because its past record is not creditable. I shall move away from that sensitive area. I understand why the right hon. Gentleman—[Interruption.] I am willing to give way. If the right hon. Gentleman wishes to intervene, I shall be happy to give way.

Mr. Shore: In my own time.

Mr. Rees: I take it that the right hon. Gentleman is prudently keeping his own counsel. No doubt, in due course we shall have a statement from the Labour Party executive, fully endorsed by the right hon. Gentleman and his right hon. Friend the Member for Ashton-under-Lyne, which will tell the country exactly what it might expect if it were rash enough to return a Labour Administration next time.
As the right hon. Member for Ashton-under-Lyne knows, having studied these matters closely, the scene has been a little altered by two recent decisions of the House of Lords. I do not need to remind the House of the cases of Eilbeck and Rawling and of Ramsey and the Commissioners of the Inland Revenue. They make it likely that the sophisticated off-the-peg schemes which were perhaps prevalent under the last Administration will no longer achieve their intended result.
Let me also emphasise that the Government have been as quick as the previous Administration to block up the loopholes as they have been disclosed. In case the House is not prepared to accept that general assertion from me, I shall remind it of the Finance Act 1980, in which we disqualified back-to-back life insurance policies and dealt with the question of leasing.
Let me remind those who have not studied the Finance Bill as closely as my hon. Friends that we have dealt with the position disclosed by the Vestey case. The hon. Member for Colne Valley was right to remind the House that this is a problem which has been running for a considerable time. The right hon. Member for Ashton-under-Lyne, when he was Financial Secretary, must have known that the case was running because the earlier stages in the High Court and the Court of Appeal were heard under his Administration, as far as I can recall. If he felt that that was a serious problem, no doubt he would have laid contingency plans to deal with the matter. We do not


have access to the previous Administration's papers, but I can only tell the House that there was no evidence that there had been any contingency plans.
Let me remind the House that we shall deal with free petrol and transport vouchers and that we have dealt in capital gains tax with the emigration of donees. That should warm the heart of the hon. Member for South Ayrshire (Mr. Foulkes), who is developing an obsessive and almost unhealthy interest in the status of the Channel Islands and the Isle of Man. I am deeply sorry that we have not been able to answer the questions which he has put down for my right hon. and learned Friend the Chancellor of the Exchequer. He will appreciate that, in so far as they properly lie in the area of my right hon. and learned Friend's responsibilities, they will demand a considerable amount of research. The hon. Member requires information about any company which may have done business here and which has now moved to the Isle of Man or the Channel Islands. I cannot promise that we shall be able to find that information.
The resources of the Inland Revenue, particularly at present with the Finance Bill running through, are a little limited. It may not be possible to find all the answers immediately, to the hon. Member's satisfaction. I must also emphasise that a number of the points which he and the hon. Member for Cathcart raised are matters of constitutional interest and the precise relationship of the Channel Islands and the Isle of Man to this country.
One recognises that in the past—and perhaps currently—there has been a degree of avoidance which is channelled through those islands. However, it is also open to residents of the United Kingdom to take their assets to countries far remote from the Isle of Man and the Channel Islands. Merely to penalise emigration to those islands would not solve that problem.

Mr. Maxton: If a person took his assets to any other country, he would normally have to go out of this country using his passport and would therefore be seen to be leaving this country and going to a foreign country. However, if he goes to the Channel Islands or the Isle of Man, which is the point my hon. Friend the Member for Workington (Mr. Campbell-Savours) made, he can travel freely with no one checking whether he is a resident of the Channel Islands.

Mr. Rees: If the hon. Gentleman is seriously suggesting that there should be close surveillance and cross-examination of every British resident leaving these shores about his fiscal motives, he is conjuring up a vision of a police State that would not find favour with the Conservative side of the House.

Mr. Richard Wainwright: The Minister mentioned the Government's action in the Finance Bill on employers' free petrol to employees. Is he really satisfied with the scale published yesterday by the Inland Revenue, which suggests that in many cases the tax will be on about one and a half gallons of petrol a week?

Mr. Rees: I willingly engage in debate with the hon. Gentleman. There are considerable practical problems—he. as an accountant, must recognise that—in dealing with that question. A solution eluded the Labour Adminstration, assuming that they applied their minds to the problem. If they did not, they were guilty of gross

negligence. I recognise the imperfections in the solution. I respectfully suggest that we defer a debate on that until the actual scale is considered by the House.
No one can reasonably make the charge against the Government that they have been negligent in the perfomance of their duties in that area. The only solution from which we have shrunk, but from which the Labour Administration did not, was to introduce retrospective legislation. We could not do so without due warning and subject to certain rules that we evolved during 1978 and made public.
The right hon. Member for Ashton-under-Lyne said that the Opposition attempted to establish a bipartisan position. I distantly recall that there were delicate overtures to the Conservative Party, but there could be no meeting of minds on what 'we regarded as the considerable constitutional impropriety of retrospective legislation, even in this area, with any prior warning. For that reason no bipartisan position could be established.

Mr. Robert Sheldon: Will the Minister answer the most important question of all? If some of the schemes were to surface again under new arrangements that made them viable, would he consider retrospective legislation? Is so, does he realise that he would have the attention of the Opposition in considering those matters?

Mr. Rees: I suppose that it would be arrogant to assume that one could ever wholly engage the attention of the Opposition. However, I am grateful to the right hon. Gentleman for his offer. He may recall—if he does not, I refer him to the Hansard report of our debates in Committee Room 10 in the summer of 1978—the terms and the basis on which a Conservative Administration would contemplate retrospective legislation in the area of tax avoidance. I do not want to weary the House with the details now.
One of the essential elements was that there should be a public statement of the Government's intention and that the legislation would date back only to that date. It would be followed by various other things—for example, that it should be referred to the tax reform committee, that where possible draft clauses should be published and that there should be legislation at the first possible opportunity. If the right hon. Gentleman's memory fails him, I refer him to those debates when the position of the Conservative Party was clearly stated. It is still the Government's position. That is what divides us.
I hope that we have established a certain measure of common ground. I hope that I have reassured the whole House that—

Mr. Campbell-Savours: Will the Minister wholeheartedly condemn the activities of the companies in the Isle of Man that place advertisements in British journals inciting our taxpayers to take up residence or establish businesses there, thereby avoiding their taxation liabilities on the mainland? Will he condemn that from the Dispatch Box?

Mr. Rees: The hon. Gentleman is again tempting me to strike a moral attitude—even to win the temporary plaudits of Opposition Members. I am confident that the Inland Revenue is studying the advertisements. If it is not, I shall enjoin it to do so. I say to the hon. Gentleman, who perhaps has not applied his mind to this issue as thoroughly


as has his right hon. Friend the Member for Ashton-under-Lyne, that there is a battery of legislative provisions that prevent transfer pricing. I recognise that current advertising does not read attractively. I shall study the hon. Gentleman's contribution in Hansard.
I shall not strike a glib attitude on this issue. To do so would not advance the debate. The subject has had a full airing. At the end of the day the new clause, although it has provided a pretext for Labour Members to sound off on the subject, strikes the Government as a shallow political exercise. It does nothing to advance understanding of the problem, which is not unique to the United Kingdom. I hope that the right hon. Gentleman will not feel obliged to press it to a Division. If he does, I hope that my right hon. and hon. Friends will reject it.

Question put, That the clause be read a Second time:—

The House divided: Ayes 216, Noes 296.

Division No. 270]
[11.26 pm


AYES


Adams, Allen
Eastham, Ken


Anderson, Donald
Ellis, R. (NE D'bysh're)


Archer, Rt Hon Peter
Ellis, Tom (Wrexham)


Ashton, Joe
English, Michael


Atkinson, N.(H'gey,)
Ennals, Rt Hon David


Barnett, Guy (Greenwich)
Evans, Ioan (Aberdare)


Bennett, Andrew(St'kp't N)
Evans, John (Newton)


Bidwell, Sydney
Ewing, Harry


Booth, Rt Hon Albert
Faulds, Andrew


Boothroyd, Miss Betty
Field, Frank


Bray, Dr Jeremy
Fletcher, Ted (Darlington)


Brown, Hugh D. (Provan)
Ford, Ben


Brown, Ron (E'burgh, Leith)
Forrester, John


Brown, Ronald W. (H'ckn'y S)
Foster, Derek


Callaghan, Rt Hon J.
Foulkes, George


Callaghan, Jim (Midd't'n &amp; P)
Fraser, J. (Lamb'th, N'w'd)


Campbell, Ian
Freeson, Rt Hon Reginald


Campbell-Savours, Dale
Freud, Clement


Canavan, Dennis
Garrett, John (Norwich S)


Cant, R. B.
George, Bruce


Carter-Jones, Lewis
Gilbert, Rt Hon Dr John


Clark, Dr David (S Shields)
Ginsburg, David


Cocks, Rt Hon M. (B'stol S)
Golding, John


Cohen, Stanley
Graham, Ted


Coleman, Donald
Grant, George (Morpeth)


Concannon, Rt Hon J. D.
Grant, John (Islington C)


Conlan, Bernard
Grimond, Rt Hon J.


Cook, Robin F.
Hardy, Peter


Cowans, Harry
Harrison, Rt Hon Walter


Cox, T. (W'dsw'th, Toot'g)
Hart, Rt Hon Dame Judith


Craigen, J. M.
Hattersley, Rt Hon Roy


Crowther, J. S.
Healey, Rt Hon Denis


Cryer, Bob
Heffer, Eric S.


Cunningham, G. (Islington S)
Hogg, N. (E Dunb't'nshire)


Cunningham, Dr J. (W'h'n)
Holland, S. (L'b'th, Vauxh'll)


Dalyell, Tam
Home Robertson, John


Davidson, Arthur
Homewood, William


Davies, Rt Hon Denzil (L'lli)
Hooley, Frank


Davies, Ifor (Gower)
Horam, John


Davis, Clinton (Hackney C)
Howell, Rt Hon D.


Davis, T. (B'ham, Stechf'd)
Howells, Geraint


Deakins, Eric
Huckfield, Les


Dean, Joseph (Leeds West)
Hughes, Robert (Aberdeen N)


Dempsey, James
Hughes, Roy (Newport)


Dewar, Donald
Janner, Hon Greville


Dixon, Donald
Jay, Rt Hon Douglas


Dobson, Frank
John, Brynmor


Dormand, Jack
Johnson, James (Hull West)


Douglas-Mann, Bruce
Johnson, Walter (Derby S)


Dubs, Alfred
Jones, Rt Hon Alec (Rh'dda)


Duffy, A. E. P.
Jones, Barry (East Flint)


Dunn, James A.
Jones, Dan (Burnley)


Dunwoody, Hon Mrs G.
Kaufman, Rt Hon Gerald


Eadie, Alex
Kilroy-Silk, Robert





Lambie, David
Roberts, Gwilym (Cannock)


Leadbitter, Ted
Robertson, George


Leighton, Ronald
Robinson, G. (Coventry NW)


Lestor, Miss Joan
Rooker, J. W.


Lewis, Arthur (N'ham NW)
Roper, John


Lewis, Ron (Carlisle)
Ross, Stephen (Isle of Wight)


Litherland, Robert
Rowlands, Ted


Lofthouse, Geoffrey
Ryman, John


Lyon, Alexander (York)
Sandelson, Neville


Lyons, Edward (Bradf'd W)
Sever, John


McCartney, Hugh
Sheldon, Rt Hon R.


McDonald, Dr Oonagh
Shore, Rt Hon Peter


McElhone, Frank
Silkin, Rt Hon J. (Deptford)


McKay, Alien (Penistone)
Silkin, Rt Hon S. C. (Dulwich)


McKelvey, William
Silverman, Julius


MacKenzie, Rt Hon Gregor
Skinner, Dennis


McNally, Thomas
Snape, Peter


McNamara, Kevin
Soley, Clive


McTaggart, Robert
Spearing, Nigel


Magee, Bryan
Spriggs, Leslie


Marshall, D(G'gow S'ton)
Stallard, A. W.


Marshall, Dr Edmund (Goole)
Stewart, Rt Hon D. (W Isles)


Marshall, Jim (Leicester S)
Stott, Roger


Martin, M(G'gow S'burn)
Strang, Gavin


Mason, Rt Hon Roy
Summerskill, Hon Dr Shirley


Maxton, John
Taylor, Mrs Ann (Bolton W)


Maynard, Miss Joan
Thomas, Jeffrey (Abertillery)


Meacher, Michael
Thomas, Dr R.(Carmarthen)


Mikardo, Ian
Tilley, John


Millan, Rt Hon Bruce
Tinn, James


Mitchell, Austin (Grimsby)
Torney, Tom


Mitchell, R. C. (Soton Itchen)
Urwin, Rt Hon Tom


Morris, Rt Hon A. (W'shawe)
Varley, Rt Hon Eric G.


Morris, Rt Hon C. (O'shaw)
Wainwright, E.(Dearne V)


Morris, Rt Hon J. (Aberavon)
Wainwright, R.(Colne V)


Morton, George
Walker, Rt Hon H.(D'caster)


Moyle, Rt Hon Roland
Watkins, David


Newens, Stanley
Weetch, Ken


Oakes, Rt Hon Gordon
Welsh, Michael


Ogden, Eric
White, Frank R.


O'Halloran, Michael
White, J. (G'gow Pollok)


O'Neill, Martin
Whitehead, Phillip


Orme, Rt Hon Stanley
Whitlock, William


Owen, Rt Hon Dr David
Wigley, Dafydd


Palmer, Arthur
Willey, Rt Hon Frederick


Parker, John
Williams, Rt Hon A.(S'sea W)


Pavitt, Laurie
Wilson, Gordon (Dundee E)


Pendry, Tom
Wilson, William (C'try SE)


Powell, Raymond (Ogmore)
Winnick, David


Prescott, John
Woodall, Alec


Price, C. (Lewisham W)
Woolmer, Kenneth


Radice, Giles
Young, David (Bolton E)


Rees, Rt Hon M (Leeds S)



Richardson, Jo
Tellers for the Ayes:


Roberts, Albert (Normanton)
Mr. James Hamilton and


Roberts, Ernest (Hackney N)
Mr. Frank Haynes




NOES


Adley, Robert
Blackburn, John


Aitken, Jonathan
Blaker, Peter


Alexander, Richard
Body, Richard


Amery, Rt Hon Julian
Bonsor, Sir Nicholas


Ancram, Michael
Boscawen, Hon Robert


Arnold, Tom
Bottomley, Peter (W'wich W)


Aspinwall, Jack
Bowden, Andrew


Atkins, Rt Hon H.(S'thorne)
Boyson, Dr Rhodes


Atkins, Robert(Preston N)
Braine, Sir Bernard


Atkinson, David (B'm'th.E)
Bright, Graham


Baker, Kenneth(St.M'bone)
Brinton, Tim


Baker, Nicholas (N Dorset)
Brittan, Leon


Banks, Robert
Brooke, Hon Peter


Beaumont-Dark, Anthony
Brotherton, Michael


Bendall, Vivian
Brown, Michael(Brigg &amp; Sc'n)


Bennett, Sir Frederic (T'bay)
Browne, John (Winchester)


Benyon, Thomas (A'don)
Bruce-Gardyne, John


Benyon, W. (Buckingham)
Bryan, Sir Paul


Best, Keith
Buchanan-Smith, Alick


Bevan, David Gilroy
Buck, Antony


Biffen, Rt Hon John
Bulmer, Esmond


Biggs-Davison, John
Burden, Sir Frederick






Butcher, John
Howell, Rt Hon D. (G'ldf'd)


Butler, Hon Adam
Howell, Ralph (N Norfolk)


Cadbury, Jocelyn
Hunt, David (Wirral)


Carlisle, John (Luton West)
Hunt, John (Ravensbourne)


Carlisle, Kenneth (Lincoln)
Irving, Charles (Cheltenham)


Carlisle, Rt Hon M. (R'c'n)
Jenkin, Rt Hon Patrick


Chalker, Mrs. Lynda
Jessel, Toby


Chapman, Sydney
Johnson Smith, Geoffrey


Churchill, W. S.
Jopling, Rt Hon Michael


Clark, Hon A. (Plym'th, S'n)
Joseph, Rt Hon Sir Keith


Clark, Sir W. (Croydon S)
Kaberry, Sir Donald


Clarke, Kenreth (Rushcliffe)
Kellett-Bowman, Mrs Elaine


Clegg, Sir Walter
Kershaw, Anthony


Cockeram, Eric
Kimball, Marcus


Colvin, Michael
King, Rt Hon Tom


Cope, John
Kitson, Sir Timothy


Cormack, Patrick
Knight, Mrs Jill


Corrie, John
Knox, David


Cranborne, Viscount
Lamont, Norman


Crouch, David
Lang, Ian


Dean, Paul (North Somerset)
Langford-Holt, Sir John


Dickens, Geoffrey
Latham, Michael


Douglas-Hamilton, Lord J.
Lawrence, Ivan


du Cann, Rt Hon Edward
Lawson, Rt Hon Nigel


Dunn, Robert (Dartford)
Lee, John


Durant, Tony
Lennox-Boyd, Hon Mark


Dykes, Hugh
Lester, Jim (Beeston)


Eden, Rt Hon Sir John
Lewis, Kenneth (Rutland)


Edwards, Rt Hon N. (P'broke)
Lloyd, Ian (Havant &amp; W'loo)


Eggar, Tim
Lloyd, Peter (Fareham)


Emery, Peter
Loveridge, John


Eyre, Reginald
Luce, Richard


Fairgrieve, Russell
Lyell, Nicholas


Faith, Mrs Sheila
Macfarlane, Neil


Farr, John
MacGregor, John


Fell, Anthony
MacKay, John (Argyll)


Fenner, Mrs Peggy
Macmillan, Rt Hon M.


Finsberg, Geoffrey
McNair-Wilson, M. (N'bury)


Fisher, Sir Nigel
McNair-Wilson, P. (New F'st)


Fletcher, A. (Ed'nb'gh N)
McQuarrie, Albert


Fletcher-Cooke, Sir Charles
Madel, David


Fookes, Miss Janet
Major, John


Forman, Nigel
Marland, Paul


Fowler, Rt Hon Norman
Marlow, Tony


Fox, Marcus
Marshall, Michael (Arundel)


Fraser, Peter (South Angus)
Marten, Neil (Banbury)


Gardiner, George (Reigate)
Mates, Michael


Gardner, Edward (S Fylde)
Mather, Carol


Garel-Jones, Tristan
Maude, Rt Hon Sir Angus


Glyn, Dr Alan
Mawby, Ray


Goodhart, Philip
Mawhinney, Dr Brian


Goodhew, Victor
Maxwell-Hyslop, Robin


Goodlad, Alastair
Mayhew, Patrick


Gorst, John
Mellor, David


Gow, Ian
Miller, Hal (B'grove)


Gower, Sir Raymond
Mills, Iain (Meriden)


Grant, Anthony (Harrow C)
Mills, Peter (West Devon)


Gray, Hamish
Moate, Roger


Greenway, Harry
Molyneaux, James


Grieve, Percy
Monro, Hector


Griffiths, Peter Portsm'th N)
Montgomery, Fergus


Grist, Ian
Moore, John


Grylls, Michael
Morgan, Geraint


Gummer, John Selwyn
Morris, M. (N'hampton S)


Hamilton, Hon A.
Morrison, Hon C. (Devizes)


Hamilton, Michael (Salisbury)
Morrison, Hon P. (Chester)


Hampson, Dr Keith
Mudd, David


Hannam, John
Murphy, Christopher


Haselhurst, Alan
Myles, David


Hastings, Stephen
Neale, Gerrard


Hayhoe, Barney
Needham, Richard


Heddle, John
Neubert, Michael


Henderson, Barry
Newton, Tony


Heseltine, Rt Hon Michael
Normanton, Tom


Hicks, Robert
Nott, Rt Hon John


Higgins, Rt Hon Terence L.
Onslow, Cranley


Hogg, Hon Douglas (Gr'th'm)
Oppenheim, Rt Hon Mrs S.


Holland, Philip (Carlton)
Page, John (Harrow, West)


Hooson, Tom
Page, Rt Hon Sir G. (Crosby)


Howe, Rt Hon Sir Geoffrey
Page, Richard (SW Herts)





Parkinson, Cecil
Stainton, Keith


Parris, Matthew
Stanbrook, Ivor


Patten, Christopher (Bath)
Stanley, John


Patten, John (Oxford)
Steen, Anthony


Pattie, Geoffrey
Stevens, Martin


Pawsey, James
Stewart, Ian (Hitchin)


Percival, Sir Ian
Stewart, A.(E Renfrewshire)


Pink, R. Bonner
Stokes, John


Pollock, Alexander
Stradling Thomas, J.


Powell, Rt Hon J.E. (S Down)
Tapsell, Peter


Prentice, Rt Hon Reg
Taylor, Teddy (S'end E)


Price, Sir David (Eastleigh)
Temple-Morris, Peter


Prior, Rt Hon James
Thatcher, Rt Hon Mrs M.


Proctor, K. Harvey
Thomas, Rt Hon Peter


Pym, Rt Hon Francis
Thompson, Donald


Raison, Timothy
Thorne, Neil (Ilford South)


Rathbone, Tim
Thornton, Malcolm


Rees, Peter (Dover and Deal)
Townend, John (Bridlington)


Rees-Davies, W. R.
Townsend, Cyril D, (B'heath)


Renton, Tim
Trippier, David


Rhodes James, Robert
Trotter, Neville


Rhys Williams, Sir Brandon
van Straubenzee, W. R.


Ridley, Hon Nicholas
Vaughan, Dr Gerard


Ridsdale, Sir Julian
Viggers, Peter


Rifkind, Malcolm
Waddington, David


Roberts, M. (Cardiff NW)
Wakeham, John


Roberts, Wyn (Conway)
Waldegrave, Hon William


Rossi, Hugh
Walker, B. (Perth)


Rost, Peter
Wall, Patrick


Royle, Sir Anthony
Walters, Dennis


Sainsbury, Hon Timothy
Ward, John


St. John-Stevas, Rt Hon N.
Warren, Kenneth


Scott, Nicholas
Watson, John


Shaw, Giles (Pudsey)
Wells, John (Maidstone)


Shelton, William (Streatham)
Wells, Bowen


Shepherd, Colin (Hereford)
Wheeler, John


Shepherd, Richard
Whitelaw, Rt Hon William


Shersby, Michael
Whitney, Raymond


Silvester, Fred
Wickenden, Keith


Sims, Roger
Williams, D.(Montgomery)


Skeet, T. H. H.
Winterton, Nicholas


Speed, Keith
Wolfson, Mark


Speller, Tony
Young, Sir George (Acton)


Spence, John
Younger, Rt Hon George


Spicer, Jim (West Dorset)



Spicer, Michael (S Worcs)
Tellers for the Noes:


Sproat, Iain
Mr. Spencer Le Marchant and


Squire, Robin
Mr. Anthony Berry.

Question accordingly negatived.

New Clause 5

INCOME TAX ON HOLIDAY PAY

'Income tax on the holiday pay of an employee liable to taxation under PAYE shall be payable by the employer in two equal instalments on 1 January in the financial year during which the holiday payment was made and on 1 July following. '.—[Mr. Robert Sheldon.]

Brought up, and read the First time.

Mr. Robert Sheldon: I beg to move, That the clause be read a Second time.
The clause does not conform with the normal run of new clauses with which we deal on Report. Normally new clauses on Report tend to follow a pattern in that they relate to matters that figured in earlier discussions. If, after a number of years, they find favour, they make their way to the statute book.
Here, however, we are dealing with holiday pay, and this is the first time that we have done so. The clause takes account of changes in the pattern of behaviour of people going on holiday and in the way in which the schedule E system operates.
Tax on holiday pay is normally payable on the date of payment of that holiday pay. Most people have a holiday


bonus based on weekly deductions. These are aggregated and the full sum is finally paid just before the annual holiday. There has been an increasing interest in holiday bonuses by a number of employers, who find this an attractive way of showing their concern for their employees, as well as providing money for them at a time when it is of greatest use to them. We know that the schedule D payers will find that they will be paying in arrear whereas schedule E taxpayers will pay not on receipt of payment of their weekly or monthly wage but in advance in the sense that the money is deducted before they receive it.
The Minister of State said that no attempt should be made to show up the differences between the treatment under schedule D and treatment under schedule E; they were both fair methods of taxation. Fair methods of taxation they undoubtedly are, but there are distinct advantages in paying under schedule D as opposed to schedule E. When the Chief Secretary replies, he will not be able to deny two basic advantages that the schedule D taxpayer has over the schedule E taxpayer. The schedule D taxpayer has his expenses allowed on the basis that they are "wholly and exclusively incurred", and the schedule E taxpayer finds that his expenses must be
wholly, exclusively and necessarily incurred".
We can see that the "necessarily" condition is absent from the schedule D taxpayer's obligations. This makes it very difficult for the schedule E taxpayer to get the advantages of certain expenses.
The other important advantage for the schedule D taxpayer is that he pays some time later. Paying some time later, at a time of high rates of inflation, means that he is, in effect, paying in depreciated currency. That means that the pounds in which he pays his tax are not pounds of the same value as the pounds he earns. The schedule E taxpayer, paying at the same time or even slightly in advance, is paying in pounds worth the same as those that he earns. There are these advantages to the schedule D taxpayer that we would be foolish to ignore.
The amount that people nowadays spend on their holidays is a very large sum indeed. It can be, said that for many people it is the third most important expenditure that they incur. After the house that they buy and the car that they purchase, for many people their expenses for their holidays form their third largest item of expenditure.
It is right that the schedule D advantage obtainable by paying subsequently ought to be considered for those with substantial sums of holiday pay bonuses which can be and ought to be, treated in a more advantageous way than is now the case. If we are to retain respect for the tax system, which it is in the interest of every hon. Member to retain, we have to find some degree of fairness between the different forms of taxation levied upon our people. The new clause is an attempt to show the even-handed way in which the tax system ought to work in people's interests.

Mr. Brittan: I am grateful to the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) for using the debate on this new clause as a convenient peg on which to hang some of the pros and cons of the different schedules of income tax. He is right to point out that there are certain advantages in schedule D as compared with schedule E.
Having said that, I must inevitably consider the new clause in the context of the tax system as it is. The right

hon. Gentleman is not suggesting that the whole of the arrangement for schedule D should be made generally applicable. It is difficult to see why holiday pay alone should be singled out in the way that he suggests. To do so would create considerable difficulties and anomalies within the context of the present tax system.
11.45 pm
I do not know whether it is necessary to go into all these points in detail, although I should be happy to do so. However, the spirit of the new clause is illustrative rather than seeking action to make a change in the law. If the right hon. Gentleman is content for me to treat it in that spirit, and to consider the implications in the way he indicated, I shall be happy to do so. On the other hand, I shall be happy to explain the sort of difficulties that would arise if such a suggestion were implemented this year.
In the absence of any indication to the contrary, I shall treat the new clause in the former sense. I am sure that the House is glad to have had the opportunity to air this issue.

Question put and negatived.

New Clause 6

VALUE-ADDED LOAN STOCKS

'1. The payments of interest by a company in respect of an issue of loan stock offered in accordance with the provisions of this section and the premiums paid on the redemption of that stock shall be deemed to be charges on the company which are allowable for the calculation of the corporation tax due to be paid by the company and shall not be taken to constitute a distribution as defined by section 233 of the Taxes Act 1970.

2. Under the terms of the loan any payments of interest made and any premiums paid on the redemption shall be determinable by reference only to the value added by the company in the accounting reference period or periods of the company immediately preceding the dates on which the payments fall due.' .—[Sir Brandon Rhys Williams.]

Brought up, and read the First time.

Sir Brandon Rhys Williams: I beg to move, That the clause be read a Second time.
The object of the new clause is to make possible the issue by companies of value added loan stocks. The dividend and redemption terms of such a stock would be tied to the value added by the company year by year. I also propose that the service of such a stock, and the premium payable on eventual redemption, should be regarded as a prior charge on the business in calculating the amount that it would have to pay as corporation tax.
The clause seeks to provide a stimulus for investment in the private sector. I know that my right hon. Friend the Financial Secretary has lately maintained that there is a steady flow of investment in the private sector. He has compared the situation now with the level of investment in real terms five years ago. However, most people believe that five, 10 or 20 years ago the level of investment in Britain was too low, with the result that our competitors have been pulling ahead all the time. For example, in Japan and other countries that are invading our markets, the level of investment is much higher now than it is in the United Kingdom.
It is commonplace to hear bankers and managements blaming each other for this situation. The bankers and the institutions blame managements because they do not come forward with suitable schemes that would attract finance which, they say, is readily available if suitable schemes


are suggested. On the other hand, companies complain that the money is not being offered on acceptable terms and, therefore, although they have splendid projects with which they would like to go ahead, they cannot get the necessary finance. As a result, the situation is one of mutual recrimination and impasse.
The ways in which a company can finance its expansion in the present situation all have serious disadvantages. Many private sector companies know themselves to have sound businesses. They believe that they should be investing in expansion or in new methods, but they cannot expand their bank debt any more, and it would be imprudent to try to finance a long-term investment on the basis of a bark debt, which inevitably is relatively short term. An issue of debentures, which before the war might have been thought to be a suitable method, is so expensive in the present state of the capital market that it places on a company a heavy burden of interest which few managements are willing to undertake.
It is open to companies to raise money on commitments related to the retail price index. I do not count myself a shrewd investor, but most people, I think, would be wary of a company that became heavily committed to the service of debt related to the RPI, because that is an index that contains elements outside the company's control, and who can tell what will happen to the RPI with the passage of the years? It does not seem to me a suitable means by which companies can raise funds from the market.
It is difficult for a number of managements to raise further capital through the equity market, because they cannot in all conscience say with certainty what profit they can hope to achieve if they succeed in raising the funds to finance the investment they have in mind. Trade union agitation could become more aggressive if the level of business revived. Money that the company had planned to use to service the dividend would have to go out as wages, because of trade union pressure which the company might not be in a position to resist.
Alternatively, the expansion of the business might take the company increasingly into export markets, where exchange rates and other terms of trading might be difficult to anticipate. Managements would be imprudent to make long-term forecasts with the confidence that the investors would expect if they were reading a prospectus. Thus all the traditional means of raising money may present serious difficulties, and management cannot be blamed if it does not take risks when raising money from the market. We need to revive the fixed interest end of the market—the area that used to be covered by the preference shares of various kinds before the war. With the unpredictable rates of inflation, the short-term cost of fixed-interest borrowing is unacceptable to the borrower, and the long-term risk to the investor is unpredictable. My device of the value added loan stock is designed to meet that problem.
We need a new class of capital that lies half-way between a debenture and an equity share, to correspond to the emergence of the institutions as the main source of investment funds. We must satisfy their concern for inflation protection over a long period and for steady growth, while considering the real nature of the commitment that the borrowers can honestly and confidently enter into in the circumstances of today.
The investment houses, institutions, pension funds, unit trusts and such bodies may be said to have a character half-way between that of a speculative investor and a

bank. We need, therefore, to devise a new type of share that lies half-way between an equity share and a debenture. We must also give the encouragement of a tax concession to get investment moving. Since the value added loan stock would place on the business a commitment that would constitute a prior charge, it would be appropriate to make it allowable as a deduction for calculation of the company's liability to pay corporation tax.
We need, of course, to consider the possible cost to the taxpayer of making such a concession. It should increase the overall yield from the private corporate sector, because it would stimulate investment in projects that firms would otherwise not afford, and that would give rise to taxable flows of cash. I do not therefore see any risk to the taxpayer in making this concession, if it successfully stimulates investment.
The question arises of the relationship to equity shareholders if a new class of share is created which becomes an important element in corporate finance. Certain difficulties might be thought to arise, but I should like to meet them. If a company needs to expand and invest for the sake of its health, it is a good idea that it should be able to raise the necessary funds on terms that are not too extortionate. If that investment proves as successful as the management hopes, it will not only be able to serve the capital that gave rise to the investment but will generate a further element of profit in the business, which will be available to all the shareholders. The equity shareholders will have a better chance of an increase in their dividend through the firm's success.
If this type of share were not available and companies consequently decided to limit their activities or to rely on obsolescent equipment, the cult of the equity would ultimately prove an unsuccessful form of worship. The company would inevitably decline and lose its market share. That could not be good for the equity investor.
The new clause also represents a decisive step in the direction of the idea of corporate partnership. It would enable businesses to cover their need for capital while retaining discretion over the way in which they dispose of any measure of profit they make after paying a fair return to the investor. It is futile to talk about corporate partnership unless we can show how a firm can strengthen its reserves and add to the element of its cash flow that it rightly and properly can distribute to the workers after proper service of all its commitments to its investors.
It no doubt is obvious that the new clause is of my own drafting, but equally obvious no doubt that I have had the benefit of drawing on expert help. It may not cover all the points that the Government would wish to see covered in a new departure in the taxation of companies. It might be thought necessary to include a definition of the method of calculating the annual addition of value. Accountants have a clear idea of what they mean by "the value added''. However, it might be advisable to specify a permitted range of methods of calculating the value added so that the borrowers and lenders could decide the precise terms that suited them in any particular case.
It might also be necessary to ensure that the tax concession is not open to abuse. We would not want people to find ways of abusing the concession so as to take money out of a business without the proper payment of tax. I believe that the Taxes Act provides adequate reserves of powers to the authorities in such a case, but perhaps it is a matter that deserves further study. I hope, however, that my right hon. and learned Friend the Chief


Secretary will welcome the principle behind the new clause. Perhaps he will prepare draft clauses for circulation to experts for discussion with a view to possible incorporation in next year's Finance Bill. Alternatively, it might be thought that the idea could be dealt with in the Green Paper on corporation tax which I understand the Government are considering publishing within the next few months.
I have made some suggestions about the way in which I hope that my hon. and learned Friend the Minister of State will respond. In particular, I hope that he will recognise that I am seeking to meet a real need and that this is a matter that cannot be left without Government action.

Mr. Peter Rees: My hon. Friend the Member for Kensington (Sir B. Rhys Williams) has long been recognised as a perceptive observer of this scene and has identified an interesting problem. However, perhaps we should examine its dimensions at greater leisure. He will know that if he is merely seeking to achieve a form of paper with indexed interest, that type of interest is already allowable for corporation tax, provided that it is of a reasonable amount.
I suspect that my hon. Friend wishes to go further than that. He has tried to devise—one sympathises with his aspirations—a sort of hybrid, something between equity capital and fixed interest capital to meet a need. We shall not find the solution to that problem tonight. His solution, as embodied in new clause 6, has certain difficulties. He has identified one detail that we could examine at greater length in conjunction with the Green Paper on corporation tax, which we hope to produce in due course. The consideration of distributions, interest and that sort of problem can be examined with greater thoroughness and at greater leisure than we can allow tonight.
12 Midnight
The House is indebted to my hon. Friend for having tabled the new clause and for having focused our attention on the problem that he has uncovered. I hope that he does not intend to press the new clause to a Division but that we may return to it in the context of the Green Paper. I cannot, I am afraid, undertake to produce any new clauses for consideration, but that depends on the outcome of consultations in the light of the Green Paper. We shall approach his suggestion with sympathy, with interest and, after his illuminating address, with understanding. I hope that he will feel that justice has been done and that he is able to withdraw the clause so that we may return to it on another occasion.

Sir Brandon Rhys Williams: I am grateful to my hon. and learned Friend for his forthcoming remarks. He has gone as far as it is reasonable to expect him to go tonight, but that does not mean that I should be satisfied if he went no further than that in the future. For the present, I am happy to accept his recommendation and I beg to ask leave to withdraw the new clause.

Motion and clause, by leave, withdrawn.

New clause 7

REPORT TO ORGANISATIONS FOR DISABLED ON INCREASE IN VAT

'Within 12 months of the passing of this Act the Chancellor of the Exchequer shall publish a report setting out the cost to all organisations of and for disabled people of the increase in value-added tax from eight to 15 per cent. and his proposals for alleviating the burden on those organisations.' .—[Mr. Alfred Morris.]

Brought up, and read the First time.

Mr. Alfred Morris: I beg to move, That the clause be read a Second time.
The right hon. Member for Wanstead and Woodford (Mr. Jenkin), since he became Secretary of State for Social Services two years ago, has missed no opportunity to stress how important charities are in helping the needy. In speeches galore, he has told one captive audience after another how much he looks to voluntary help to fill the gaps in the Welfare State.
Not to be outdone, the Prime Minister has gone much further than her right hon. Friend. Indeed, heaping praise on the volunteer in a speech to the Women's Royal Voluntary Service earlier this year, she gave it as her view that the State's welfare role should simply be to fill the gaps in charitable provision. She said:
The statutory services are supportive, underpinning where necessary, filling the gaps, helping the helpers".
For the spotlight thus to shine on the importance of charities and the voluntary help they provide is, of course, very cosy for a Government who are busy shooting holes in the Welfare State. The Prime Minister said she recognised that
it is right for the Government to help independent voluntary bodies financially".
For even better measure, she enthusiastically told the WRVS that the
voluntary movement is at the heart of all our social welfare provision".
The clear implication of that speech, with all its high-minded talk of the "privilege" of giving voluntary help to those in special need, is that the Government's policy of cutting State provision for the poor and the vulnerable is not only justified but even desirable and long overdue.
With a Prime Minister so strongly in their favour, how, then, have the charities been getting along under the present Government? The answer has to be that most of them have never had it so bad. In fact, many are in grave financial difficulties and some, even among the best known, have had to cut services to the people they exist to help as the only alternative to going broke.
Listen briefly to the words of Maureen Rose writing in Community Care after the Prime Minister's speech to the WRVS:
Voluntary and charitable organisations might be expected to be full of optimism about their future, with the recent deluge of ministerial statements apparently emphasising their importance.
She went on:
The true picture, however, is one of depression, uncertainty and cutback, with financial crisis looming closer for many. When their actual position is contrasted with the current Government theme of enthusiasm for the voluntary movement, the mood sharpens to anger and bitterness.
To make sure that the Government knew of their plight, major charities for the care of disabled people joined others in writing to the Chancellor of the Exchequer to give


him facts and figures. At the same time they urged him to give them some relief from the intolerable burdens he had imposed on them by doubling VAT.
The charities that approached the Chancellor included the Spastics Society, the National Society for Mentally Handicapped Children and Adults, the Royal National Institute for the Blind, and the Royal National Institute for the Deaf. But the Secretary of State not only rejected their plea; he refused even to see a deputation. His rebuff was to organisations of and for disabled people which, by common consent, make a most valuable contribution to the well-being of many of the most needy people in Britain today. Between them they are being made to carry an entirely unacceptable burden of VAT. The Spastics Society alone paid £250,000 last year, and every penny of it was intended not for the Chancellor but for charity.
In consequence of the ravages of inflation, of the doubling of VAT and of other increased burdens—for example, the Spastics Society is worse off by £30,000 per annum in consequence of the Chancellor's further increase in petrol duty—the charities are closing down homes and day centres, meals-on-wheels facilities, advisory and other important facilities and services for disabled people.
Mr. Tim Yeo, the director of the Spastics Society, in commenting on the Chancellor's priorities, reacted bitterly for the charities as a whole when he said that
the Government does not care that charities are struggling to maintain their services in the face of crippling burdens that they should not have to bear.
Nevertheless, he and his colleagues were not prepared to give up the fight. Writing in protest to the Prime Minister, they told her that the doubling of VAT had compelled them to reduce their services and of the hardship that had been caused to the people they exist to help. They went on to tell the right hon. Lady that unless the burden of VAT was reduced, further cuts in their services would be unavoidable. This in turn, they said, would make more people dependent on local authority services at a time of cuts in the help that local councils could offer.
Tim Yeo, explaining now the particular difficulties of the Spastics Society, told the Prime Minister:
The Government must realise that we are in a very serious financial position with our highest deficit ever of £823,000. Big cuts in our services to some of the nation's most severely handicapped men, women and children have had to be made. Yet as local authorities cut back, we are needed more and more.
The Prime Minister's reply was as negative as that of the Chancellor and totally inconsistent with her statement to the WRVS that
it is right for the Government to help independent voluntary bodies financially.
After all, in the approach they made to her the charities were asking not for financial help from the Government but simply that the Treasury should take its hand out of their till.
Roger Hadley, of the Voluntary Services Unit, has commented that the Government are strong on rhetoric and weak on practical help for charities, while Brian Rix of the National Society for Mentally Handicapped Children and Adults has said:
We are running a service for charity and we are being clobbered.
The Prime Minister's much-vaunted "support" for charities is seen as humbug by some of their most distinguished administrators. Much apart from helping him who sacrifices to help others, the Government's policies are mugging the Good Samaritan himself.
It is not too late, even now, for the Government to think again about the new and extremely onerous burdens they have placed on charities, not least on those of and for disabled people. In urging them to do so, I am asking no more than that they should match precept with practice. At the very least, they should accept the modest terms of the new clause, which I have pleasure in commending to the House.

Mr. Lewis Carter-Jones: I am sure that the Minister will accept the new clause, because it will not cost the Government a penny. It will allow all right hon. and hon. Members to realise what is being done.
When we contribute to a charity, we are not contributing to the Exchequer. It is intended to be given to the charity for its sole use. We do not expect to find 50 per cent. deducted for various expenditures. It is very interesting that charitable organisations which are household names are protesting very hard. I hope that the Minister will be honest and fair enough to say that he has made a hollow sham of the statement by the Secretary of State for Social Services in the 1979 election campaign, when he said:
A Conservative Government will ensure that greater opportunities exist for more charitable giving through our policy of tax cuts.
The Government have made a sham of that election promise, because they are now using the charities as tax gatherers, and money intended for charitable purposes is being put into the Exchequer's coffers. That is disgraceful and unacceptable.
The new clause is not asking the Treasury to give any money back. It is saying "Please tell us how much money you are taking from well-deserving charities. How much money are you taking from the pockets of the disabled?" That is all that we are asking for in the new clause. I hope that the Treasury Ministers have the courage to accept it, so that all hon. Members will know precisely what the Treasury is up to.
Labour-intensive types of charity—caring for children within schools, within training and in residential homes—are services which the Prime Minister said were to be encouraged. One can only say that the Treasury's actions show that the Government are discouraging them They are discouraging activities by voluntary organisations at a time when local authority expenditure is being cut.
My right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris) has mentioned some of the organisations concerned. Dr. Barnardo's, MENCAP, the Spastics Society and the Royal National Institute for the Blind are making a plea and saying that as a result of the Treasury's action some of their projects have had to be cut. But these are not extravagant projects. They are essential: projects for disabled people.
I ask the Treasury spokesman to promise tonight, first, that he will accept the new clause in the interests of open government and, secondly, that he will go one stage further and say "We are here to help the charities and not to take money from them." Our evidence is that the Treasury is now taking £12 million per annum from charities designed to serve and help the least able in our society.

Mr. Tom McNally: It is important to have on record the attitude of the Government—not the


attitude that is often given at Question Time by the Prime Minister or the Secretary of State for Social Services but the real, hard nitty-gritty of Government, the Treasury decision. There is a clash. Hon. Members want to know the Government's philosophy. Is the philosophy to encourage charities and local organisations, or is it, as my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris) remarked, that the Treasury hand will be for ever in the till?
I do not think that I have ever known such local pressure and indignation across the board to compare with that expressed against the imposition of VAT on local charities. This must be the experience of hon. Members on both sides of the House. People who go out to work and to collect for charities do not imagine that they are tax gatherers. They imagine that they are working for the charity to which they give their time and commitment. Is the Government's philosophy that they will cut back on DHSS spending but that they will give local initiative and independent charities their head? If so, how does this match with the fact that the Government, in practice, tax charities? This is the essence of the new clause, the eloquence of my right hon. Friend and the statistics that my right hon. Friend gave, together with the remarks of my hon. Friend the Member for Eccles (Mr. Carter-Jones), with his expertise in welfare matters.
The Government have to square the circle. Otherwise, local and national charities will believe that just as the Government's commitment to welfare in terms of the DHSS is bogus, so is their request to independent charities to take up some of the slack equally bogus. That is the challenge facing the Minister.

Mr. John Home Robertson: I wish to support the initiative taken by my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris) in tabling the new clause. Value added tax is a dreadful imposition on charities concerned with disabled people and on many individuals who are disabled or who have disabled children in the family.
The addition of 15 per cent. VAT to the general costs and charges involved in work for the disabled is bad enough. Its addition to the cost of aids and specialised equipment such as wheelchairs, which are essential for the disabled, is downright scandalous. I recognise that aids and wheelchairs specifically approved by the Department of Health and Social Security are exempt from VAT. However, a constituent with a severely disabled daughter has brought forcefully to my attention the fact that VAT has had to be paid on a specially adapted wheelchair that the girl needs to get in and out of a car because it has not yet satisfied the stringent requirement or the time scale for testing of the DHSS.
Aids for the disabled used by the charities are expensive. They involve specialised research work, specialised material and specialised labour in manufacturing small quantities of items for the disabled. If the Treasury then adds 15 per cent. VAT, the situation becomes inexcusable. It is outrageous that such a situation should be tolerated in the International Year of Disabled People. I hope that the House will give careful consideration to the new clause.

Mr. David Crouch: The hour is late, and I know that we are continuing this debate into the early

hours of the morning. We are all kept up to consider this important Bill. Therefore, I make no apology for keeping the House on a matter that concerns the disabled in this International Year of Disabled People.
For some 16 years, I have been a vice-president of the Disabled Drivers Association. For 25 years, that association has held an annual service in Canterbury cathedral, in my constituency, which I have attended for the past 15 years. That service was recently taken over, because the disabled drivers decided to relinquish to the Spastics Society their responsibility for a service of about 1,000 people in the cathedral once a year. I attended the service this year a few weeks ago and listened to the national director of the Spastics Society make the address about disabled people.
I may not be wise about the Treasury's requirement at this stage, in this International Year of Disabled People, to tax the disabled. I may not be wise, but I am severely disturbed as a Member of Parliament who attends his cathedral and prays for the disabled and then visits the spastics, talks to them about their problems and sympathises with them. I go away chastened by that experience.
I should be less than honest if I did not say something in response to the speeches that I have heard from the Opposition Benches drawing to the Government's attention the concern that all hon. Members must feel about disabled people who hold a position in society so different from our own. However, the clause does not go very far. It does not go as far as I should wish. I should like to take a burden off disabled people and to make a demonstration in this year.
I remember speaking to an amendment from these Benches when my right hon. and noble Friend Lord Barber was Chancellor of the Exchequer. The Chancellor knew that he would not carry the day, and he lost the day. Without having to go to a vote, he graciously acceded to the will of Parliament and agreed to a concession to disabled people. I respected him for making that concession. If Parliament cannot exercise some influence on its Front Bench at any hour of the day or night, it is not much of a Parliament.
Things may happen on our streets which may dismay and distress us and which we passionately condemn. It is in this place that we should show passion—not noise—on behalf of people who deserve our support, no matter what party we belong to.
I do not know whether the hon. Members who are present in the Chamber—and there are quite a few—understand the full details of the difficult situation facing the Government, with all their responsibilities in financing the progress of the nation, but it has been drawn to our attention tonight that there are some at least who should not have to bear such a harsh burden. I have listened to only this part of the debate, and I am moved that the requirements asked of the Government tonight are not very strong on the Government. They should be stronger. The disabled deserve something more than a report. They deserve a concession in this year of all years—the International Year of Disabled People.
My hon. and learned Friend the Minister of State is a compassionate person. My right hon. Friend the Financial Secretary is also a compassionate man. They are not looking at me critically. They are as concerned as we all


are. Perhaps we should look again at the question of taxing the disabled and make some concession to them, even at the eleventh hour of nearly half-past 12 o'clock.

Mr. Peter Rees: I am sure that the whole House is moved by the intervention by my hon. Friend the Member for Canterbury (Mr. Crouch). He and I are neighbours in Kent. I know of his deep sincerity and sensitivity in these matters. I am grateful to him for his acknowledgment of my interest in these matters. I am sure that the whole House is concerned with the disabled, not only because this is the International Year of Disabled People.
I pay tribute to the right hon. Member for Manchester, Wythenshawe (Mr. Morris). He has had a deep concern for the disabled for a long time. I admired his contributions when he was a distinguished member of the last Administration. I am bound to say with utter candour that I think that he has led the debate into a blind alley. He has asked us to test the Government's sincerity. I do not feel any embarrassment about our fiscal measures in this respect.
The right hon. Gentleman constructed a speech by cobbling together a series of selective quotations from letters which many hon. Members received from various charities. He said that the Government should take their hands out of the charities' pockets and that we have been strong in rhetoric but weak on action. Let us test the right hon. Gentleman's rhetoric by the fiscal actions of this Administration.
I shall remind the House of the fiscal measures that the Government have taken on behalf of charities, particularly those charities involving the disabled, since they came to power in May 1979. The right hon. Gentleman is a person of candour and integrity and he will immediately concede what I am about to say because we exchanged words across the Dispatch Boxes in the summer of 1979 about a special provision which we introduced to allow Motability—an organisation which received warm support from this side but, so far as I recall, lukewarm to frigid support from his Administration—to recover VAT on cars bought for leasing to the disabled. I chalk that up as one measure for which we can claim credit.
Let us move to the Finance Bill 1980. The right hon. Gentleman is a person of candour and integrity and he will concede my next point. We reversed a rather mean measure introduced by a Labour Chancellor. I know that—de mortuis nil nisi bonum—it was introduced by Dr. Dalton. It limited the relief for deeds of covenant to tax at the basic rate. We extended that so that it covered higher rates to encourage generosity in donors by deeds of covenant. That was acceding to a specific request by a range of charitable organisations.
We also reduced the time for which deeds of covenant could operate, if they were to qualify for tax relief, from six to three years. I chalk that up as something to the credit of this Government. It is a small measure but covenants for variable or unstated amounts were exempted from stamp duty. That also makes it easier for people to be more generous to charities.

Mr. Carter-Jones: Can I, then, go to MENCAP, the Spastics Society, Dr. Barnardo's and the Royal National Institute for the Blind tomorrow and say that they are financially better off than they were before? That is the nub of the argument. Can I honestly go to them tomorrow and say "Don't worry, boys. Just go and see the Financial

Secretary and he will give you the money?" That is the vital question. Will the Minister please give that assurance?

Mr. Rees: I am taking head on the vital question which we are now debating in the terms presented—

Mr. NcNally: rose—

Mr. Rees: Will the hon. Member contain himself for a little while? I listened in silence to his ill-judged remarks. I hope that he will do me the courtesy of listening to me.

Mr. McNally: Will the hon. and learned Member give way?

Mr. Rees: I shall not give way to the hon. Gentleman. I shall go through the fiscal measures, as I was challenged to do by the right hon. Member for Wythenshawe, who moved this ill-judged new clause. I was asked to state the fiscal measures for the relief of charities. Opposition Members may not like what they have to hear, but I hope that they will do me the courtesy of hearing me out in silence. Then I hope that they will go back to the charities whose cause they affect to espouse and tell them precisely what they have heard.
I shall tell them now—[interruption.] We have had to listen to a great deal on this subject from Opposition Members and it is only right that we should put the record straight. I am sorry if it hurts the hon. Gentleman, but we know that he supplied a great deal of carefully researched material to the previous Labour Prime Minister. He must know the importance of getting the facts right. When we have got the facts right, we can all draw our conclusions and go back, in triumph or dismay, to our constituents and tell them what we have concluded.
If the hon. Member will allow me to proceed, I shall move to corporation tax. As he will know, since he has obviously paid great attention to these matters, although he did not disclose that in his speech, charities are exempt from a wide range of income tax, which we have enlarged. We have made it easier for companies to give to charities and to get relief from corporation tax. That, too, should be chalked up in our favour.
We raised the exemption limit on gifts to charities made within a year of the death of the donor for capital transfer tax purposes from £100,000 to £200,000. In fairness, the right hon. Gentleman and his hon. Friends should have reminded the House about that, too. We have exempted charities from development land tax.
I now come to the question of VAT. There have been a range of reliefs for supplies to charities, some of which. I admit, predate the arrival of the Government. They have been topped up by the Government—let both sides of the House take credit for it. To pretend, as some Opposition Members pretended, that VAT is a crushing and unqualified burden in this area is paltering with the truth.
Talking books for the blind and the severely handicapped and certain ancillary equipment are zero rated with supply to an appropriate charity. So are radios for loan to the blind. Most aids supplied for handicapped persons are also zero rated. Medical and scientific equipment, ambulances—this was introduced concurrently with the Budget—and most aids for handicapped


persons when supplied to charitable institutions providing care, medical or surgical treatment for handicapped persons are also zero rated.
Donations of goods for sale by charities or charities for the relief of the distressed are also zero rated. It would have been fair for the right hon. Gentleman and his hon. Friends to remind the House that, for example, the mobility allowance will be increased to £16·50, which is an increase of about 65 per cent. since the Government took office. The blind allowance in the Finance Bill has been doubled.
The right hon. Gentleman chose to say—from time to time we know that we all descend from pure fact into rhetoric—that charities have never had it so bad. All I can say is that if they have never had it so bad fiscally under this Administration, the mind simply boggles at their state under the previous Labour Government. I ask the House to reject with utter contempt this ill-judged new clause.

Mr. Alfred Morris: With the leave of the House, may I say that we have heard a deeply unworthy and outrageous reply to speeches that were made with the very serious intention of helping organisations of and for disabled people.
If there was rhetoric in my speech, it was the rhetoric of those who were speaking on behalf of the disabled. I quoted the Prime Minister and the Secretary of State for Social Services. The Minister gave the impression that charities are better off now than they were under the Labour Administration. I wish to quote a letter from the director of the Spastics Society. I shall use his words to show the House the seriousness of the position that he and his colleagues now face. He said:
As a consequence of the Chancellor's minor extension of relief from VAT in the last Budget, the Spastics Society will save only £6,000 of the £250,000 lost last year on VAT, and the increase in petrol duty will cost us another £30,000 per annum".
That is the reality of the position as it is faced by organisations of and for the disabled. The Minister had the impudence to compare what is being done by this Government to help the disabled with what was done between 1974 and 1979. Between those years there was an increase in expenditure on cash benefits alone for the chronically sick and disabled from £474 million to £1,584 million, an increase of £1,100 million over the five-year period.
My hon. Friend the Member for Eccles (Mr. Carter-Jones) asked whether he could tomorrow tell the charities that they are better off under the present Government. The Minister knows quite well that they are worse off. He cannot challenge the figures that I quoted. He has colleagues behind him tonight who know full well, because they are members of the all-party disablement group, that the figures I gave were the figures given to that group. They know, as well as we know, that the anxieties that I have expressed tonight are those of distinguished charity administrators. I quoted Brian Rix, who said that his organisation, which exists only to help mentally handicapped children and adults, is being clobbered by the Government.

Mr. Carter-Jones: I am deeply concerned about the attack that has been launched. This is a narrow clause relating to VAT and the charities. I asked a simple question. Now I ask it of my right hon. Friend. Does he

know of any charity concerned with the disabled that is better off as a result of the VAT regulations? That is the nub of the argument.

Mr. Morris: If there is an increase in VAT from 8 per cent. to 15 per cent., all charities are bound to suffer from the additional burden they are being asked to carry by the Government.
Tonight I have understated the feeling among the organisations of and for the disabled. I hope that the Minister will reconsider his position. It is clear to me that right hon. and hon. Members on the Conservative Benches accept what we have said in the debate. I hope that the hon. and learned Gentleman will think again and will accept the clause, which, if it errs at all, errs upon the side of modesty.
The hon. Member for Canterbury (Mr. Crouch) said that he would like to see a much stronger clause. I hope that he will insist, with me, that the least the Government can do is to accept the clause.

Question put and negatived.

New Clause 10

AMENDMENT OF SECTION 46 OF THE FINANCE ACT 1980

'(1) In Section 46 (7) of the Finance Act 1980 (amending section 58 (1) and (2) of the Finance Act 1978) after the figure "£1,000", there shall be inserted the words "or, in the case of shares appropriated under a profit sharing scheme established by a 'job ownership company' as defined in Schedule (Definition of Job Ownership Company) to this Act, £3,000."

(2) In section 46 (9) of the Finance Act, 1980 (amending paragraph 1 (4) of schedule 9 of the Finance Act 1978) after the figure "1,000" there shall be inserted the words "or in the case of shares appropriated under a profit sharing established by a 'job ownership company' as defined in Schedule (Definition of Job Ownership Company)to this Act, £3,000.".'. — [Mr. Grimond.]

Brought up, and read the First time.

Mr. Grimond: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker (Mr. Bryant Godman Irvine): With this it will be convenient to discuss the following amendments: No. 26, in clause 25, page 14, line 17, after '1976', insert
'or a "job ownership company" as defined in Schedule (Definition of Job Ownership Company) to this Act'.
No. 194—new schedule—

'DEFINITION OF JOB OWNERSHIP COMPANY.

For the purpose of section (Profit sharing schemes) of this Act, section 75 of the Finance Act 1972, Schedule 1 to the Finance Act 1974, section 58 of the Finance Act 1978 and schedule 19 to that Act and section 46 of the Finance Act 1980, a "job ownership company" shall be a company that:
(a) is incorporated under the Companies Act 1948 as a company limited by shares.
(b) contains provisions in its Memorandum of Association which limits its membership to:
(i) individuals bona fide employed by or whose income is substantially derived from working upon the business of the company or its subsidiaries and
(ii) trustees for such persons as are specified in the definition of an "employee share scheme" contained in section 87(1) Companies Act 1980 and which prohibit the alteration of such provisions and
(c) contains provisions in its Articles of Association which are in force throughout the accounting year of the company in question which provides: —
(i) for each member to have one vote only (excercisable in person or by proxy) at meetings of members of the company irrespective of the number


of shares in the capital of the company held by such members and that such vote cannot be excluded from consideration or disregarded and
(ii) that each member of the Board of Directors is elected by a simple majority of company and that any casual vacancy is filled by the Board for a temporary period only not to exceed two months that Articles of Association may provide for any person who is a member of the company by virtue of his trusteeship pursuant to sub-clause (a)(11) above to be ex officio directors.
(iii) that the Managing Director (if any) is appointed and removable by a single majority of the general meeting of the company and
(iv) that no money shall be borrowed or obtained by a Job Ownership Company (other than upon the issue of shares to a member or to an individual on becoming a member) upon terms that allow the rate of interest on return thereof of any premium on repayment over the net amount lent to vary or be calculated by reference to the rate of sales income profit or the value of any asset of the company provided that this paragraph shall not prevent a Job Ownership Company from taking a lease or lease back property on terms which relate to the income from sub-letting or to the underlying value of any superior or inferior interest in the property in question of factoring its debts on normal commercial terms and
(v) that when an individual ceases to be a member (whether on death, retirement, expulsion or otherwise on his or her qualification to be a member of the company ceasing) the share or shares of such former member in the capital of the company and any other security issued to such member by the company shall be purchased or otherwise immediately vested either in the Company in an individual or in trustees qualified to be members under the Memorandum of Association and that (subject to anything in the Articles of Association in the case of expulsion) an appropriately calculated value or price is to be paid for such purchase or vesting.
(vi) enables persons qualified to be members under clause 2(b)(1) above to become members.
(d) is not an excluded company as defined in section 37 Finance Act 1980.
(e) is controlled by a majority of the persons falling within the meaning of clause 2(b)(1) above.
(f) is not controlled by either
(i) such persons as directly or indirectly controlled the company at any time with a twelve month period before the company purported to qualify or would otherwise first have qualified as a job ownership company or
(ii) such persons as directly or indirectly controlled a company which transferred all or part of its business to the company at any time within a twelve month period before the issue of shares in the company to the persons in question or
(iii) such persons as directly or indirectly transferred to the company a business or all or part of the assets of a business formerly carried on by them whether in conjunction with others or not unless such transferring company has itself a Job Ownership Company.'.

Mr. Grimond: I am glad to see that the Financial Secretary to the Treasury is to reply. The right hon. Gentleman on previous occasions has shown himself sympathetic to the purpose that my right hon. and hon. Friends and I have in mind. That purpose is to make it easier for workers to acquire and run their companies. It surely must be desirable that we should spread the ownership of industry more widely. It must be desirable that more workers should own and run the companies in which they work. As an industrialist has said,
Management by confrontation cannot go on indefinitely.

As another one has said,
We should be moving towards a company-owning democracy.
The schedule would create a new class of company, a job ownership company. The essentials of that company are defined in the schedule. It would be a company with no absentee owners. It would be owned by those who worked in it or by trustees on their behalf. It would elect or appoint its own management, and in the determination of the affairs of the company every worker would have one vote.
We have deliberately drawn the schedule with some flexibility. It does not insist that all workers in the company should own the same proportion of the shares of the company. However, it ensures that the company should be controlled by its workers. There are certain safeguards that no doubt will please the Treasury.
The new clause is designed to make it easier for workers to take over companies either in the private sector or in the public sector. There are many developments. Several groups of workers are negotiating with the present owners of companies to take them over. There are family companies where the families wish to divest themselves of ownership. There is a great variety of companies throughout the country in which this type of negotiation is going on. It is also taking place in sections of the nationalised industries.
In the National Freight Corporation and at the airports it has been suggested that the staff or workers should take over some of the functions now dealt with by the nationalised corporations. We read in the newspapers that there are groups of directors and groups of senior staff who are anxious to buy out the present owners and take over the companies.
Surely the Government and every hon. Member should favour these developments. If the Government are proceeding with their proposals for hiving off some parts of the nationalised industries and returning to some form of private ownership, they should at least favour returning them to the workers in the industries where the workers are showing an interest in acquiring them.
Why is it necessary to form a new type of company? The answer to that question—my hon. Friend the Member for Colne Valley (Mr. Wainwright), who is an accountant, will be able to explain the technicalities—is that one of the present alternatives is to set up a co-operative under the old Co-operative Acts, which are strict about the handling of shares and the type of business that can be established. Candidly, they are not altogether suitable for the operations that I have mentioned.
12.45 am
The other possibility is to set up an ordinary limited liability company. We do not deny that these procedures could be carried out under the existing laws on limited liability, but I am advised that to get the full advantages of the tax proposals it would have to be a closed company. Either this would have to be limited to very few people or all the members would have to be directors, which is clearly impossible.
New clause 10 would extend the advantages given to a profit-sharing scheme under the 1978 Finance Act and raise the figure from £1,000 to £3,000. If that were done, and the increased figure written in, it would become far more worth the while of workers to join this type of company and out of this profit-sharing on pre-tax profits


to buy out the previous owners. That is the purpose of the new clause. Without it, it will be much more difficult to push through this type of company, although we do not deny that in theory it could be done.
I draw the attention of the Government, as I have done before, to the fact that when this matter was debated in another place industrialists such as Lord Seebohm, Lord Caldecote, Lord Rochester and Lord Boyd-Carpenter, all of whom have great experience in industry, said that this type of company was necessary and that the operation could not be conveniently carried out under existing legislation. They were supported by accountants and lawyers such as Lord Lloyd of Kilgerran and Lord Diamond. We may therefore take it that there is authoritative advice on record that this type of company is necessary.
We do not pretend that the drafting of our proposal will necessarily suit the Government, but we have been pressing the Government for a long time to deal with this. We have raised the matter on both the Companies Bill and the Finance Bill. We constantly get encouraging remarks from Ministers, but so far we have had no action. I hope that we shall now get some.
It must be apparent to anyone looking round this country that the more we can get local people to put their local savings into the companies in which they work and in which they will have an interest, the better it will be for all of us, the better it will be for industry and the better it may be for the cities and other places where too many people feel totally frustrated by the present state of the economy.
I hope that I shall not be told that the Government cannot do this because of the possibility of tax evasion. If in the nineteenth century Governments had looked only at tax evasion, the limited company would never have been set up. No change in legislation can be absolutely guaranteed to allow no evasion. To refuse what is widely accepted as a necessary and useful reform because a few people may conceivably take advantage of it—no more advantage, I should have thought, than of many other aspects of our legislation—to me is absurd.
I remember as a boy at boarding school asking to have a bottle of water at night because I was thirsty and being told by the schoolmaster that if he gave me one he would have to give one to every boy, somebody would break it and the water would run over the table. I therefore had to go thirsty for many years in case some boy broke a bottle and had to mop the water up. Let us not approach this subject with that mentality.
I do not pretend for one moment that this measure will put all our industrial relations right or that it will put our economy right, but I suggest that this is the direction in which we must move. We must get away from the conflicts of industry. We must interest more people in the running of it and spread the assets of it more widely. Above all, we must give people in industry the feeling that they have more control over it. Even if that can be done in only a small way, and even if this proposal is only a small step towards it, I suggest that it is a step in the right direction and should be supported by the Government.

Mr. William Waldegrave: I support the right hon. Member for Orkney and Shetland (Mr. Grimond). I take it that it is at the heart of the

Government's industrial policy that there should be no centralised pattern either of industrial activity or of the method by which production is organised. I take it that at the heart of the Government's policy is the belief that we are, in the industrial sense, a plural society and the hope that a thousand flowers will bloom. In a number of ways we have taken a series of radical initiatives to help the generation of new, small conventional companies.
The right hon. Gentleman's initiative is in addition to that and is, I take it, fully in accordance with the Government's approach to these matters. In this instance we are saying not that we are concerned to aid small companies as against large ones but that we want to help the generation of new forms of social organisation in production and in service industries.
The lawyer's strict answer to the proposal is, as the right hon. Gentleman said, that it is possible to set up such a company now. But when in the future we want in this House, as no doubt we shall, further to help initiative in this direction, it will be useful to have on the statute book a definition of a company of this kind. We should find it easier to extend help to job ownership companies, as we extend it to easily defined conventional small businesses, if the clause were law.
There are a number of good historical and other reasons why the traditional co-operative does not meet in every case the needs of those wishing to buy out part of an existing company or to start a new company. But even those who are great partisans of the traditional co-operative should see no threat in our attempts to introduce yet another industrial pattern. The future shape of industry, its products and its technology are in a state of flux. It is difficult to predict in a whole range of activities the best pattern for the future.
The clause is an insurance policy, a method of opening up yet another range of options. If it were only to attract the commitment of quite a small number it would be a commitment worth obtaining. That such commitment can be forthcoming is proved by the often-quoted example of the Mondragon co-operatives in Spain. That is not unlike the pattern for which we are arguing tonight in the clause and the schedule.
Undoubtedly there are objections from taxation and other points of view to the introduction of what, by definition, is an anomaly. But I hope that that will be used not as an argument against the idea but as an argument in favour. By the nature of our argument we are saying that we should add another method which may attract the commitment of some of our citizens who wish to proceed in this way; by this nature, such innovation will be anomalous.
I hope that we shall not be advised that this will set dangerous precedents. We should be striving constantly to provide the widest possible range of options in industrial and service industries for those who wish to start new enterprises. I do not know whether these proposals can be accepted in their present form, but I hope that the Minister will not only make a friendly response but will go a little further and offer the help of his great Department. If he says that our proposal is defective, will he tell us the best way forward?
At the heart of the free industrial society is the right of those who have products to sell to determine for themselves their method of production within the market. What matters is that they should sell their products at the right price and find a market for them. We in the


Conservative Party and in the House generally should have no objection to any form of organisation for that production and should have no preference for one over the other.
What we are interested in is production, without waste, at the right price, of goods that can find a market. If there is another way, not yet established in this country, whereby such goods and services can be provided, let us welcome it and experiment with it. There can be little cost to such an experiment and it might lead to something that could produce, as it has in Spain, interesting and productive results. I hope that, even if the clauses are technically defective, the Minister's response will be friendly and positive.

Mr. Richard Wainwright: I am happy to follow the hon. Member for Bristol, West (Mr. Waldegrave) in his eloquent defence of a pluralist industrial society, particularly that part of it in which he asked that many flowers should bloom. This flower of workers owning their jobs has blossomed for many years, and blossomed abundantly in the Mondragon area of Spain, on the experience of which these proposals are based by the job ownership organisation in this country.
How right the hon. Member was to make it plain that no one is suggesting, in proposing the new clause and the amendments, that this pattern of job ownership is everyone's cup of tea. There will always be many workers, and no disrespect to them, who are quite content to do a day's work in someone else's organisation, so long as they are reasonably paid and have no cares or responsibilities once the hooter goes at the end of the working day. Likewise, there will always be fewer people—but there are some—who are so altruistic that they are happy to work in a common ownership, where there is no individual ownership and where everything is thrown into a common pot. This type of organisation, which requires its own legal arrangements and which cannot be fitted to a procrustean bed of existing legislation, caters for people who are sufficiently individualistic to want to have the ownership of their jobs but who want to work in a fairly large, well-organised and expertly managed concern, producing top-quality products.
As I hope I have made clear, it is a condition of a job ownership company that everyone working for the company, after a short qualifying period, must acquire an appropriate share in the company. The only shareholders are the workers in the company, or, temporarily, the trustees who hold the pot of shares in the transitional period between some people leaving and being paid for their shares and others joining the company. There are, therefore, no outside holders and at the same time there are no workers who are without a share. It is on this basic and distinctive principle that Mondragon goes from success to success.
I emphasise that some of these proposed changes in the law are to assist the transition of a business, and there are examples in this country of family businesses that want to take this step. The idea is to facilitate the transfer of a family owned company, at the wish of the family, into a job ownership company.
Most hon. Members must be aware of the unhappy results when a family has run out of members, out of steam or interest, has not wished to continue in family proprietorship and has allowed itself to be swallowed up by some vast conglomerate. How unhappy have the

majority of those absorptions proved to be. All kinds of glib assurances are always given that the style of the company will continue as before and that the tone of the company and the workers, will be protected. It is within the experience of many of us—certainly it was ray experience when I was in practice—that after a year or two the horror descends and new and unpalatable regimes are applied. The atmosphere of co-operation is often lost, and the whole enterprise ends on a sour note. Most industrialists now realise that that period of wholesale absorptions and mergers was a misguided one.
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How much better and desirable it is that the family which feels that it can no longer provide adequate direction from its own members should say "Let us now turn this business over on realistic terms—not as a gift or an act of pure philanthrophy—to the workers who have been loyal to this concern and have played a considerable part in building it up and keeping it going." That transition from a family company to a job ownership company requires some structural assistance in the law as well as some tax assistance.
It is simply to provide those two facilities for what would be an important transition that the new clause, the new schedule and the amendment are proposed.

Mr. Lawson: We have listened to three speeches, from the right hon. Member for Orkney and Shetland (Mr. Grimond), my hon. Friend the Member for Bristol, West (Mr. Waldegrave) and the hon. Member for Colne Valley (Mr. Wainwright), on a subject with which all of us have a great deal of sympathy and about which we shall rightly hear a great deal more in the future.
I begin by paying tribute to the great deal of work which I know the right hon. Member for Orkney and Shetland has put in to pursuing the translation of the Mondragon idea into the British system. He has had a number of meetings with my hon. and learned Friend the Minister of State on this matter, as well as meetings with other Ministers. The right hon. Gentleman has been most assiduous.
I should also like to pay tribute to my old friend, Robert Oakeshott, who in many ways has been the guiding spirit behind this. More than 20 years ago, when I was features editor of the Financial Times, Robert Oakeshott was one of my feature writers and a good one, too. He was always full of ideas then, and I am glad that he is still as creative today.
The idea of the diversification of corporate structures, and in particular job ownership, is one with which most Conservative Members, and I suspect Labour Members as well, have a great deal of sympathy. However, we are now discussing three specific aspects of this—the new clause, an amendment and a new schedule. The new schedule seeks to define the job ownership company, and to some extent the new clause and amendment turn on that.
The amendment relates to a clause that gives further assistance to co-operatives, which shows that the Government are fulfilling their words with deeds. We are seeking to help co-operatives. I realise that job ownership companies are different from straightforward co operatives, but in clause 25 we have sought to give further assistance to workers' co-operatives. The right hon. Member for Orkney and Shetland seeks to extend that to job ownership companies.
The right hon. Gentleman referred to a recent announcement of a possible privatisation of the National


Freight Corporation by means of a massive management buy-out. If that comes to pass, it will do so very much with the Government's blessing. It may well be a precursor of further such developments.
Even under present legislation, entities of this kind can exist. Therefore, we must come to the question whether they need legal and fiscal assistance, and in particular what are the merits of the new clause, the amendment and the new schedule.
The schedule defines the job ownership company. I hope that the right hon. Gentleman will not think that I am being evasive when I say that a more appropriate place for a statutory definition, should we decide to have one, would be a Companies Act rather than a Finance Act. That is the normal place in which we define various kinds of company or business entities. I do not blame the right hon. Gentleman for taking this opportunity to try to insert a definition here, but it is an unusual place. The House will have a further opportunity to consider the matter when it considers the Companies Bill.
The version of the definition that is before us is different from the draft definition put forward by Job Ownership Ltd. in the discussions with my hon. and learned Friend the Minister of State last year. This shows that the matter is still in a state of flux. There is still some evolution of the thinking of Job Ownership Ltd. about the correct definition.

Mr. Nicholas Baker: Is it not the case that the job ownership company as defined now is entirely organisable within the framework of company law as it is, and requires no amendment of company law? In fact, the concept of a job ownership company is a tax concept, and therefore it is appropriate that it should be discussed in the context of this Bill.

Mr. Lawson: I shall come to the fiscal points. The right hon. Member for Orkney and Shetland and his hon. Friends are seeking to insert by a schedule a definition of a job ownership company, and that matter is really more appropriate for a Companies Act.
There are various reasons why this definition, whether or not it is in the right Bill, is not right. It is not apparent, for example, why the tax concessions that are argued for should be denied in respect of a company set up largely in conformity with job ownership principles which permitted the managing director to be appointed by the board, or voting rights to be related to the length of service, or a debenture holder to appoint a director. I understand that there are other, rather more technical, defects that make the schedule unsuitable.
There is also the matter of purchases by a company of its own shares. This is covered by the Companies Bill, but it is not yet part of company law. The taxation consequences of the new rules for the purchase of own shares are still being examined. The Government will produce a consultative document, with a view to making proposals in next year's Finance Bill.

Mr. Crouch: I do not think that there has been mention of a matter that is fundamental to the definition. It is not mentioned in the amendment or the schedule either. Underlying the whole proposition is the fact that members of a job ownership company would be contributing, because they are working for themselves. The schedule refers in paragraph (b)(i) to:

individuals bona fide employed by or whose income is substantially derived from working upon the business of the company or its subsidiaries".
That is another way of saying that the underlying theme is a lesson in productivity, or an approach to more productivity. I should have thought that my right hon. Friend would like to pick up that point. We have the germ of a good development. I am sure that he will not brush it aside.

Mr. Lawson: I am not trying to brush anything aside, particularly improvements in productivity and the whole idea of the job ownership company. I am trying to address myself to the new clause and to the amendments. Much thought has gone into the detail and, therefore, it is only right that I should pay it some attention. I am certainly not brushing aside the concept.
The purpose of the new clause is to increase the £1,000 per annum limit on shares under the profit-sharing provisions, which are embodied in our Finance Acts, to £3,000 in the case of members of the job ownership scheme. I am not persuaded that that is necessary. Of course, right hon. and hon. Members will be aware that that limit was only £500 until we increased it, in last year's Finance Act, to £1,000 for employees in any type of company. However valuable job ownership companies may be, they are not of exclusive merit. It is difficult to justify increasing the sum in their case to £3,000, particularly when they can take full advantage of the present £1,000 limit. They can have two schemes side by side: one an approved scheme under the 1978 Act, as amended, which goes up to £1,000, and one a non-approved scheme, for the purposes of the 1978 Act, which would enable them to have the extra £2,000, thus bringing the sum up to £3,000. Therefore, I am not satisfied that it is justifiable to make a special concession to job ownership companies that is not open to other companies that might wish to have employee share schemes. They can take full advantage—up to the £1,000 limit—of existing legislation.
I turn to the amendment. I apologise for the complexity of the issue. The amendment seeks to extend a concession in arrangements for co-operatives in clause 25 to job ownership companies. Job ownership companies are not discriminated against by clause 25. The purpose of clause 25(3) is to help those who have hitherto been excluded from relief, namely, members of small businesses organised as co-operatives. Hitherto the relief has been available only to certain members of partnerships and to members holding a material interest. That means roughly more than 5 per cent. of the equity in closed companies.
Members of job ownership companies are not necessarily excluded from the relief available to material shareholders in close companies. We have looked into this matter carefully and we are not satisfied that there is any disadvantage. However, I make this offer in good faith. If the right hon. Member for Orkney and Shetland is prepared to withdraw the new clause, I shall be prepared to reconsider the need for special relief for members of job ownership companies that are not close companies, provided that examples can be produced to demonstrate that the absence of such a relief is causing difficulties.
I shall go further than that and repeat the offer that was made to the right hon. Gentleman in general terms in a letter that he received from my hon. and learned Friend. Although we do not think that the proposed tax changes are fundamental or essential to the successful launching of


job ownership companies, if Job Ownership Ltd. is able to point later at examples of difficulties in practice, we shall be happy to look at them or at any new proposals that Job Ownership Ltd. or the right hon. Gentleman may seek to introduce.

Mr. Grimond: I thank the Minister for the kind words he said about Robert Oakeshott. I should declare an interest in that I am chairman of the small organisation of which Robert is the main instigator. It is a non-profit-making organisation and I have declared my interest in it frequently before.
I am a little frustrated. When I suggested that the Liberal Party wanted to table an amendment to the Companies Bill, I was drawn aside courteously by the Government and told that the right Bill was the Finance Bill. The hon. Member for Dorset, North (Mr. Baker) told us that we were talking about taxation and that the Companies Bill really was not the right medium. We tabled an amendment to the Finance Bill and the Minister told us with great courtesy that the Government were delighted but that the amendment was a matter for the Companies Bill.
I understand that the Minister will consider the matter again. I hope that he will read the letter written by the Minister of State about close companies which said that all the members of a job ownership company would have to be directors. I may be wrong, but I am sure that the Chief Secretary will look that up.
As I understand it, the Minister has come some way to meeting us. We are told by industrialists, accountants, lawyers and Lord Oram that if we are to pursue the matter of getting companies and their workers to set up companies we must have a definition of a job ownership company. Accountants throughout the country find it extremely difficult to draw up the necessary documents unless they can refer to a definition.
I agree with and emphasise the point made by the hon. Member for Bristol, West (Mr. Waldegrave) and my hon. Friend the Member for Colne Valley (Mr. Wainwright) that we want to see in being all sorts of companies and co-operatives. This is not an exclusive move. Therefore, I hope that the Government will go further still. We are slowly making progress. I understand that we have not been chucked out of the Finance Bill and told to return to the Companies Bill. I suppose that that is a step forward.
On the Minister's undertaking that he will write to us explaining his proposals to relieve us of any tax disadvantage and, I hope, making more proposals and incorporating a definition of job ownership companies, which everyone admits is necessary, I beg to ask leave to withdraw the clause.

Motion and clause, by leave, withdrawn.

New Clause 17

SAVINGS-RELATED SHARE OPTION SCHEMES

'(1) In paragraph 8 of Schedule 10 to the Finance Act 1980, there shall be added the following new sub-paragraph—

"(2)For the purposes of sub-paragraph (1) above a person shall be regarded as ceasing to hold the office of employment by virtue of which he is eligible to participate in the scheme where the company with which he holds the office or employment ceases to be a company of which the company concerned has control".

(2) The existing paragraph 8 shall be renumbered as subparagraph 8(1).'.—[Sir William Clark.]

Brought up, and read the First time.

Sir William Clark: I beg to move, That the clause be read a Second time.
This is a technical new clause, but before I try to argue it the Government should be congratulated on what they have done over the past two years for share option schemes. The share option schemes have been much improved since the Government came into office. However, there is an anomaly in the schemes, especially in relation to the savings-related share option schemes. The new clause allows an employee who has held a share option for three years to exercise it within six months of a share takeover, because if there is a share takeover the company ceases to be a member of the group, and under existing law it means that the relief lapses for the employee.
I do not need to remind the House that under the existing rules if a business is sold the employee who has held his option for three years—which is covered by the present rules—is given the right to exercise the option within six months of ceasing to be employed by the company. But there is an anomaly in that if the shares of the company are sold the employee may continue to be an employee of that company, but his option lapses because the company then loses its group relief. The new clause seeks to remove that anomaly by giving relief in this case.
I appreciate—and the Minister and the rest of the House will appreciate—that it is very technical, but I ask the Minister to give me an assurance that where there is a transfer of ownership of a company where share option schemes are in operation, whether by a sale of the company or by a sale of the shares, the employee holding the shares should not lose any relief. If the Minister can give me that assurance, I shall be most grateful.

Mr. Lawson: As my hon. Friend the Member for Croydon, South (Sir W. Clark) said, this is a technical point, but it is certainly a good one. Hitherto the Revenue has maintained that, due to the operation of paragraphs 12 and 21 of schedule 10 to the Finance Act 1980, a participant in a savings-related share option scheme of this kind who continued to work for the former subsidiary company after it had left the group or been taken over could not exercise his rights at all under paragraph 8 of schedule 10, even if he had held the rights for at least three years, on the basis that he had not ceased to hold employment.
However, the Inland Revenue has now taken legal advice on the matter. It is advised that the earlier interpretation was not correct and that the position which my hon. Friend is concerned to put right is already covered by the existing legislation. I am grateful to my hon. Friend for drawing my attention to the point. The Minister of State will be writing to him about it. It is clear that the new clause is unnecessary, as it is clear that the existing legislation covers the point.
Perhaps in this context I should mention that in view of the reference to "associated company" in paragraph 12 of schedule 10 it seems likely that a delay of one year may be imposed before the participant will be treated as ceasing to hold the office or employment by virtue of which he is eligible to participate in the scheme. If that is indeed so, it is something that we should consider and look at again, and that we shall certainly do.

Sir William Clark: I am pleased to hear that the Revenue has taken legal advice on the matter. Sometimes Back-Bench Members have to move amendments of a very technical nature in order to get clarification. I am delighted that my right hon. Friend has accepted the spirit of the amendment. In view of his explanation, I beg to ask leave to withdraw the clause.

Motion and clause, by leave, withdrawn.

New Clause 21

EXEMPTION FROM TAX ON MOBILITY ALLOWANCE

'In section 219(1)(a) of the Taxes Act (which, as amended by Schedule 2 to the Social Security (Consequential Provisions) Act 1975, charges to income tax benefits under certain provisions of the Social Security Act 1975 or the Social Security (Northern Ireland) Act 1975 except unemployment benefit, sickness benefit, invalidity benefit, attendance allowance, non-contributory invalidity pension, maternity benefit and death grant), after the words "non-contributory invalidity pension" there shall be inserted the words "mobility allowance,":.—[Sir David Price.]

Brought up, and read the First time.

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Sir David Price: I beg to move, That the clause be read a Second time.
I hope that the happy spirit will continue as we debate my new clause. Its object is to take mobility allowance outside the scope of income tax and hence to make it tax-free. I must once again declare a personal interest. I think all hon. Members know that my wife is a recipient of mobility allowance.
The House will recall that mobility allowance was introduced by the then Labour Government on, not inappropriately, Friday 13 September 1974. The purpose of the new mobility allowance was made very clear in the then Government statement:
The Government believes that the best solution to this complex problem"—
the immobility of the disabled—
lies in making greater mobility available to a wider range of the disabled so many of whom are at present immobilised by lack of ability to pay for it.
The House will observe that there was nothing in that statement to suggest that it had anything to do with income, salary, remuneration or perquisites. It was a direct cash allowance to assist disabled people to be more mobile. It was an important improvement in the scheme of things for the handicapped. It gives a degree of freedom of mobility to those whose disabilities make them very immobile.
I salute the Government on the improvements that they have made in the level of the mobility allowance. As the House knows, this year the annual uprating took the mobility allowance from £14·50 a week to £.16·50 a week. There are about 195,000 beneficiaries. That is a figure that I have received in a recent parliamentary answer.
Why is the mobility allowance taxed when other similar allowances are tax-free? That is the key question. I have a long list of allowances which are tax-free. At this late hour, in the interests of time, I shall not read them out. They are numerous. They are virtually all tax-free. If anyone challenges me, I can produce replies to recent parliamentary questions.
Why is the mobility allowance taxed? I suggest that it has nothing to do with principle—that somehow mobility allowance is of a different character from, say, attendance

allowance or the many allowances that go to the war disabled. We know from replies by then Treasury Ministers when this allowance was introduced that it was simply the arithmetical expediency of the moment. I quote the words of the right hon. Member for Llanelli (Mr. Davies), who was then a Treasury Minister. In 1975 he said:
I concede that the attendance allowance cannot be argued to be different from the mobility allowance, and under the previous Conservative administration it was decided it should not be taxed."—[Official Report, 17 July 1975; Vol. 895, c. 1875.]
Therefore, there was no matter of principle in the view of the Government who introduced mobility allowance that distinguished it from attendance allowance. It was simply on the narrow calculations of the budgetary arithmetic of the moment. I do not believe that that is a sufficient reason to retain a major injustice that has continued since the mobility allowance was introduced.
This point was debated in 1975, 1976 and 1978. I shall not embarrass ministerial colleagues who spoke in those days in favour of making mobility allowance tax-free. I have numerous quotations with me, but it is too late to bore the House with them. I shall merely quote what I might call the classic Treasury reply, which came from the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). He said:
The reason for taxing mobility allowance is the same as that for taxing all benefits—administrative practicability."—[Official Report, Standing Committee A, 27 June 1978; c. 1708–9.]
I suggest that mobility allowance is not a proper subject for taxation. I do not make any appeal to the Treasury because this is the International Year of Disabled People, or anything as primitive or as sentimental as that. I appeal simply on the matter of principle and consistency—that this is not a proper subject for taxation.
1.30 am
I take my right hon. Friend's mind back to before the introduction of the mobility allowance. In those days the arrangements for the disabled and the immobile were that they got a three-wheeler motor car—a bit of hardware—if the recipient satisfied certain conditions. I was not aware, nor is there any evidence, that any recipient of such a vehicle was ever assessed by the Inland Revenue for benefit in kind. Subsequently, four-wheelers were introduced. Instead of taking a Ministry four-wheeler, it was possible to get a cash allowance, provided certain tight rules were satisfied, which was never taxed or taken into account by the Inland Revenue. Prior to the introduction of the wider mobility allowance, no one receiving help, either in cash or hardware, from the Government was taken into tax by the Inland Revenue.
When the mobility allowance was introduced, the Revenue made a change without any authority, so far as I know, and decided that it should be taxed as though it was income or income in kind. Income is defined under schedule E to the Income and Corporation Taxes Act 1970. This states:
Tax under this Schedule shall be charged in respect of any office or employment on emoluments therefrom".
The word "emoluments" is defined in section 183(1) as
all salaries, fees, wages, perquisites and profits whatsoever.
By no stretch of the imagination can "perquisites", which seems the only relevant word in that definition of income, be extended to include mobility allowance. I reflect upon the reply of my right hon. Friend the Financial


Secretary on the previous new clause. As a matter of law, I put it to him that the mobility allowance should not be taxed.
The standard argument deployed by Treasury Ministers since the allowance was introduced is that of cost. According to a reply I have received, the cost is £10 million. My right hon. Friend is, of course, concerned about the public sector borrowing requirement and the Government's Budget strategy. If he concedes my new clause, the amount involved will be £10 million. Out of a public sector borrowing requirement of £10,500 million, this represents less than one-tenth of 1 per cent. My right hon. Friend is a man of great determination. I put it to him as kindly as possible that I doubt whether he will get the public sector borrowing requirement correct within one-tenth of 1 per cent. It would be a most remarkable achievement if he succeeded.
The correct figure represented by the new clause is 0·095 per cent. I am prepared to abandon my new clause if my right hon. Friend will guarantee to me that he will get the public sector borrowing requirement within that degree of accuracy. I shall give him a tenfold lead. I am prepared to say 0·1 per cent. or even to raise the odds to the extent of saying 1 per cent. If he says he cannot achieve that accuracy, he can concede my new clause as a matter of principle and law without detracting from the Government's Budget strategy.
I am confident that my right hon. Friend will respond as handsomely to my proposition as I have put it to the House. Should he have doubts about accepting the proposal for the obscure reasons that move the Treasury mind but are denied to we humble mortals, I offer him a trade-off—that he gives a guarantee that when invalidity and other benefits that clearly are income are brought into tax he will take mobility allowance out of tax. There are many benefits that should properly come into tax. The mobility allowance, like the attendance allowance, should be below the tax threshold because it is an allowance that society gives to seriously handicapped people to bring them up to the starting gate in life. They are, therefore, of a different nature.
I bring no sentimentality to my argument. I do not call in aid, as happened on an earlier new clause, the International Year of Disabled People. This new clause involves a permanent problem. In straight justice and practicability, my new clause is proper and correct, and I do not know what possible reasons my right hon. Friend can have for rejecting it.

Mr. John Hannam: This is not the first time that we have debated a new clause aimed at relieving recipients of the mobility allowance from taxation. I recall tabling amendments to a number of Finance Bills in the past since the mobility allowance was introduced in 1977, and no doubt if the Government do not accept the new clause tonight I shall table more amendments to future Finance Bills.
The allowance should be regarded as—and is—a disablement costs allowance. It is not a benefit or form of income. It therefore should not be taxed. My hon. Friend the Member for Eastleigh (Sir D. Price) has more than adequately put the case for tax exemption, so I shall not take up the House's time by repeating what he said.
The allowance was brought in to extend help for disabled people and give mobility to those people who are virtually unable to walk. The purpose was twofold: first,

to enable basically disabled people to purchase and drive their own specially adapted vehicles; secondly, to enable severely disabled people who are unable to handle their own vehicles to have transportation as disabled passengers.
We supported the introduction of the allowance because we wanted disabled people to get about and live as normal a life as possible, to enable them to get to work where they could earn money and contribute taxes in the normal way, pursue normal lives and have a social existence. It is, therefore, wrong in principle to tax the very allowance that is designed to cover basic costs.
The attendance allowance was the other major costs allowance that was introduced during the past decade. That is not taxed, and rightly so. I do not disagree with the general principle that income-supportive benefits should be taxed. However, benefits which bring disabled people up to the starting point of living—to the starting gate, as Peter Large, the Disabled Income Group spokesman has often called it—should not be brought into taxation. They are designed to offset a basic disadvantage and are not a form of supplementary income.
The present system of disablement benefits has long been recognised as a rag-bag. It is a tradition of this House to pay lip service to the restructuring of the entire system to remove the poverty traps and the anomalies that exist. However, we keep increasing the size of the problem, and Treasury Ministers then say that the cost of changing the system has become so great that it is out of the question.
So whenever we have an opportunity to show that we understand the inequality of the present system and of the taxation of this allowance, and to move towards a general disablement costs allowance—a below-the-line costs payment—that is non-taxable, we should seize that opportunity. The present situation means that a disabled person who has a mobility allowance on top of income in the form of social security benefits, which are non-taxable, will probably escape tax on his mobility allowance. If he is a disabled person whom we have encouraged to go out and earn money and pay tax, he will have to pay a large part of his mobility allowance back in taxation. That cannot be fair.
We could debate many other issues such as mobility allowances for the blind arid partially incapacitated. However, the new clause is based on a clear principle. It should be accepted.

Mr. Lawson: The House appreciates the sincerity with which my hon. Friend the Member for Eastleigh (Sir D. Price) introduced the new clause. We also appreciate the work of my hon. Friend the Member for Exeter (Mr. Hannam) through the all-party disability group and in other ways. As he said, this is not a new subject for debate.
There was one new argument, however. We heard a seductive argument from my hon. Friend the Member for Eastleigh, who said that if we could forecast the public sector borrowing requirement within £10 million the argument should not be conceded but that if we could not. do that it should be conceded. It is possible that he cannot estimate his own income to within £10. That is not a reason why he should give me £10, because he would be £10 worse off if he did. That is the way in which the Treasury is obliged to examine the claims and requests put to it.
My hon. Friend also suggested that, as a matter of law, it was wrong to tax the mobility allowance. The debate did not hinge on a matter of law. All social security benefits


are theoretically liable to tax, except those specifically exempted under section 219 of the Taxes Act. The mobility allowance has never been exempted. That is the strict legal position.
The whole question of benefits which are liable to tax and those which are not is a mess. There is no great logical distinction, so far as I can discern, between those that are allowable for tax and those that are not. Parliament has taken particular decisions at particular times.
My hon. Friend the Member for Eastleigh mentioned the attendance allowance, which is not liable to tax, and asked what the difference was. In Standing Committee on the Finance Bill 1978 the then Financial Secretary, the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), said that the attendance allowance was "different." He developed his argument by saying that one could always find differences and similarities and that the position was difficult.
We have had it quite clear—this is agreed by the Opposition Front Bench—that the general tendency or drift should be bring benefits into tax rather than take them out. In this Finance Bill there are provisions to bring unemployment benefit into tax. We have also announced our intention to bring the remaining untaxed, short-term benefits, for example sickness and invalidity benefits, into the tax net at some stage.

Mr. Clement Freud: I have been listening with care. Is the Financial Secretary saying that his reply to the new clause is to threaten to bring the attendance allowance into the tax net?

Mr. Lawson: No. The Government have no intention whatever of bringing the attendance allowance within the tax net. I was speaking of the general tendency. The hon. Gentleman will remember what we did about the war widows' pensions when we took them out of taxation. I do not say that there is total consistency but I was speaking of the main thrust. It is nothing new. It is desirable that we should be open and honest about these matters on both sides of the House. Our general tendency is to believe that benefits should be brought into tax where possible.

Mr. Maxton: Does not the Minister agree that when in this area large sections of our community essentially already receive their travel, in the form of company cars, almost tax-free, to give that benefit to some of the weakest in our society would be beneficial?

Mr. Lawson: That does not have much to do with the new clause. I am sure that if it had been, my hon. Friend the Member for Eastleigh would have made that point.
In addition to the confused question of principle and the taxability of benefits, there is also the question of costs, to which my hon. Friend rightly alluded. We were faced with a choice because there are always competing claims on resources. We wanted to do something on the mobility allowance. We were faced with the choice whether to increase the mobility allowance or to remove it from tax. The choice which we took was to increase the mobility allowance substantially more than the rate of inflation, so that a significant increase in real terms is coming up this November.
The point has been made already in the debate that, since the Government took office, the mobility allowance

has been increased by 65 per cent. That is considerably more than the increases which have been made in any other social security benefits over the past two and a half years. That illustrates the importance which we attach to the mobility allowance and to helping the people who are in receipt of and who need the mobility allowance. There have been other measures to help the disabled, the doubling of the blind allowance in this Finance Bill being one of them.
On this occasion we did not feel that, in addition to increasing the allowance, we could afford to take it out of tax; nor were we satisfied that that was the right answer in any event. My hon. Friend has made a number of powerful arguments. Although I regret that I cannot accept his new clause on this occasion, we shall firmly bear in mind the points which he has made.

Sir David Price: Does my right hon. Friend accept the point which I made at the end of my speech? Looking to the future, as he rightly said and as previous Treasury Ministers have said, many benefits that are currently outside taxation should be brought in and there is the concept of those which bring handicapped people up to the starting line in life. I would put the mobility allowance into that category. Those benefits are of an entirely different order from those which are income support. I am entirely with him, as the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) was in the previous Government, in arguing in favour of bringing those into taxation. As someone who served with the right hon. Member in the old Select Committee looking at tax credit, I am entirely at one with him. However, I ask my right hon. Friend to think about this. Mobility allowance joins constant attendance allowance as something entirely different. That is the point which I want to establish.

Mr. Lawson: The line and the distinction which my hon. Friend seeks to draw is a little more complicated than he makes out. Those whose total income is above the starting point pay the most tax. That is the nature of our system. Therefore, it is not as simple as that. We shall bear in mind the arguments which he has put forward, and that is one of the arguments which we shall strongly bear in mind. I mean that. I ask my hon. Friend, since he has made his point and we have had a valuable debate, to have the courtesy to withdraw his new clause on this occasion.

Sir David Price: Those are seductive words from my right hon. Friend. I shall not embarrass him, the Opposition or the Government Whip by quoting remarks made by Conservative Front Bench spokesmen on previous occasions. I hope that my right hon. Friend will allow me and my hon. Friend the Member for Exeter (Mr. Hannam) to bring representatives to discuss with him the point that I raised. I do not believe that it affords the difficulty that he thinks it does.
I do not wish to swank, but I have been involved in this area for many years. I do know a little bit about it. It is extremely late at night. I notice that there is little support for my new clause from the Opposition Front Bench. I beg to ask leave to withdraw the new clause.

Motion and clause, by leave, withdrawn.

New Clause 22

GRADUATED SCHEME OF CORPORATION TAX WITHOUT MARGINAL RATE PENALTY

'(1) In section 95 of the Finance Act 1972—
(a) Insert new subsection (1A) at the beginning as follows:
(1A) Where a trading company resident in the United Kingdom has no associated company at any time in an accounting period, corporation tax shall be charged on its profits at such reduced rates (to be known as the 'independent companies rates') as Parliament may from time to time determine in respect of so much of its profits as does not exceed £2,000 and the next £3,000, £5,000, £5,000, £5,000, £10,000, £10,000, £10,000 and £10,000 respectively.
(b) In subsection (1) after "company" in line 1 insert "which is" and after "United Kingdom" insert "and which is not within subsection (1A) above".
(c) In subsection (4) delete "subsection" and substitute "subsections (1A) and
(d) In subsection (7) after "with the addition" insert "for the purposes of subsections (1) and (2) above".
(e) Insert—
(9) In subsection (1A) above 'trading company' has the meaning given in section 37(12) of the Finance Act 1980".'.

(2) In Clause 20 of the Finance Bill 1981 insert—
(4) For the financial year 1980 and subsequent financial years the independent companies rates mentioned in subsection (1A) of the said section 95 shall be as specified in the table below:


Profits
Rates


The first £2,000
Nil


The next £3,000
10 per cent.


The next £5,000
15 per cent.


The next £5,000
20 per cent.


The next £5,000
25 per cent.


The next £10,000
30 per cent.


The next £10,000
35 per cent.


The next £10,000
40 per cent.


The next £10,000
45 per cent.".'.

—[Mr. Loveridge.]

Brought up, and read the First time.

Mr. John Loveridge: I beg to move, That the clause be read a Second time.
The clause corrects an anomaly that affects firms growing from small to medium size—at least, it will correct it if the Government, as I hope, accept it. I am glad to move the new clause as chairman of the Conservative smaller businesses committee. I am grateful for the support of my hon. Friends the Members for Hertfordshire, South-West (Mr. Page), Luton, East (Mr. Bright), Bristol, West (Mr. Waldegrave) and Surrey, North-West (Mr. Grylls).
The new clause is important for firms that are growing—just those firms that should provide jobs as the recession eases. The Government have done much for the smallest firms—for example, through the loan guarantee scheme and loans for start-up firms. We welcome the amendments that they accepted as the Finance Bill progressed. We are also grateful that many of the suggestions put forward by the smaller businesses committee have been acted upon, so much so that it is now fair to say that for the smallest firms in Britain the climate has entirely changed. They barely need the revival of the economy to play their part in creating new jobs. However, the medium-sized firms are not so well placed. The new clause is important for them.
The anomaly arises because of the way in which the special low rate of corporation tax for small firms is phased out by marginal relief. That creates an eccentric hump—an area of higher taxation through which a company must pass as it grows. The effect is that 40 per cent. corporation tax is paid up to £80,000 of profits. The 52 per cent. rate is paid over £200,000 of profits. But in between those figures there is a no-man's-land—or hump—where the corporation tax is 60 per cent. That is paid on between £80,000 and £200,000 of profits. That is clearly anomalous.
It is an incentive for any company nearing the £80,000 threshold not to grow through the wide band ahead of it where it will be charged suddenly at a 50 per cent. higher rate of tax. Such a company must grow two and a half times in profit terms before the rate of tax comes back to that paid by its larger competitors. This offends common sense, especially when we want medium-sized firms to grow and create more jobs.
The new clause would put the matter right by a progressive scale that passes directly from a low rate of corporation tax to 52 per cent. on all profits over £60,000 or thereabouts. The clause involves a limited amount of extra relief from the Government. However, that is not essential. The scale could have its progression altered easily by the Government as my hon. Friends and I are not necessarily asking for any more total tax relief.
We want a scale that removes the hump, which is the unsatisfactory and discouraging feature. It is possible that the scale can ascend gently to the rate of 52 per cent. without the Government forgoing 1p of tax. The idea need cost them no more. Progressive scales work comparatively simply in normal income tax and would work simply for corporation tax.
The error is to discourage growth. The Government have recognised that because they paid heed to our representations made during the consideration of last year's Finance Bill. In this year's Bill they have reduced the hump by lowering the 66 per cent. rate to 60 per cent. That is welcome, but it would be far better and simpler if there were a natural progression to the 52 per cent. rate.
This kingdom is badly off for medium-sized companies and yet they are precisely those that are most needed. The Government have done much to improve the lot of small and medium-sized firms, but they have concentrated mainly on the small firms. I ask them to accept the new clause so that they may encourage small firms to grow to become large firms. The anomaly can easily be removed.

Mr. Richard Page: In supporting the principle of the new clause, I do not wish to appear ungrateful to the Government for the moves that have already been made within the Bill to widen and flatten the hump and reduce the rate of corporation tax that is presently placed upon small companies. The stark rate of about 40 per cent. has been extended to £80,000 and the full rate now starts after £200,000. However, the longer hump of corporation tax presents a series of barriers to companies that wish to expand and develop once the 40 per cent. level of corporation tax has been reached.
The barriers are more than psychological, although the psychological argument of company managements being dissuaded from further effort or expansion, and dissuaded from going through the difficulties that my hon. Friend the Member for Upminster (Mr. Loveridge) has described before they can break through to the other side to the 52


per cent. rate of full corporation tax, is enough in itself to justify the fairly deep consideration of any proposed changes.
The new clause is set out in a way that will not discourage companies from increasing their profitability at any set point. The very much lower rates at the initial stages will be a positive encouragement to allow small businesses to build up capital for expansion. Employers faced with a choice between the personal rates of taxation and the lower starting rate of corporation tax, which would leave far more capital in the company, especially at a formative stage in its development, will lean far more readily to choose the latter course.
The rate bands set out in the new clause embody only the principle. With the limited resources at our command, it is impossible to ensure that the total tax from these rate bands would be exactly the same as that at present received from corporation tax. As my hon. Friend the Member for Upminster said, our intention is not to deprive the Revenue of any corporation tax but merely to spread the load in a more equitable fashion.
2 am
It seems logical to have a simple graded system of corporation tax rather than the present rather complex system. It will help smaller businesses at the bottom of the ladder, at the start of their formative years, to build up a little more capital for growth. I believe that it will also remove any psychological barriers which may exist and help companies improve and progress in their economic life. If the Minister is not prepared to consider it this year, I hope that it will be given an in-depth review for presentation probably next year.

Mr. Graham Bright: I wish briefly to support my colleagues and to stress that the principle behind the new clause is to do away with the terrible barrier beyond which people suddenly have to pay corporation tax. The barrier is certainly real. I know personally of companies which have desperately avoided growing to the level at which they would have to pay it. Legislation which deters a company from growing and expanding is a very bad thing. As has been pointed out, the idea behind the new clause is to ensure careful phasing so that there is not this built-in barrier and companies gradually move up to paying the full rate of corporation tax.
I ask the Government to consider taking on board the principle, because it is a good one. No one is trying to take any money away from them. If they take this on board and consider it carefully, I am sure that they will be able to find a formula for a graduated scheme for corporation tax which will not lose them any money. We are trying not to take money away from them but merely to amend the system to encourage growth, which is the one thing that all of us, certainly on the Conservative side, wish to see in the next two or three years.

Mr. Michael Grylls: I wish briefly to support the new clause. I am delighted to see that the Minister with responsibility for small businesses, the Under-Secretary of State for Industry, is present as he has done so much for small businesses. I know that he will do more in the future to keep up the good work, and no doubt he would like to support the clause. This is a form of

corporate taxation for smaller firms which the United States has used for years. For 30 years it has had a very low graduation of corporation tax in which the percentage rates in the lower bands have always been very low.
This seems a very sensible system. We wish to help the small, growing company to retain as much of its profits in the early years as it possibly can. It does not seem very sensible for everyone to start off at a rate of 42 per cent. The graduated rates proposed in the new clause, rising in bands of 5 per cent., therefore seem sensible. I believe that the new clause would do a great deal to help companies retain their profits and also encourage them to expand.
It seems crazy that as companies increase their profits and cross the threshold, they forfeit all the advantages of the reduced rates. Again, the new clause would introduce a very simple system whereby all the advantages of the reduced rate bands were kept up to a limit of £60,000, beyond which the full rate of taxation would apply.
I hope that the Government will look at this matter carefully and will not just thrust it to one side, saying that it is adding a complication to life. Perhaps it is adding a little complication, but surely that is worth tolerating if it means that we shall help our smaller companies to grow faster and to employ the people we want to be employed. It is a constructive clause and the Government should give it the most serious consideration.

Mr. Lawson: I shall do my best to be brief. That is the general sense of the House, and it is an hour at which brevity is appropriate.
I am grateful to my hon. Friend the Member for Upminster (Mr. Loveridge) for the kind things he said about what the Government have already done for small businesses. All of those who have spoken have said that we should look at the proposal carefully. I suspect that we have looked at it more carefully than they may like. The more carefully one looks at it, the less attractive it appears.
There is a dilemma that faced the Conservative Government who introduced the small companies corporation tax rate in 1972 and has faced Governments since. There is a choice. Either relief can be confined to small businesses—defined, of course, in terms of profits—with marginal provisions that ensure that the relief tapers out and that large companies are denied relief. Or relief can be given to the bottom slice or slices, tapered in any way one likes, of the income of all companies. That is what the clause seeks.
The first method has the disadvantage of the highish marginal rate as soon as the limits for relief are exceeded. But the second method is a most inefficient way of helping small companies, if that is the aim. Anything that is revenue—neutral—my hon. Friends said, and I respect them for it, that they wanted something that would cost the Revenue nothing—in the form that they suggest would leave a large number of small companies much worse off than they are under the present arrangements. That is inevitable. Anything that was designed to make no company worse off but was along the lines that my hon. Friends are suggesting would cost hundreds of millions of pounds.
That was why we decided that the right way to tackle the problem of the high marginal rate was to retain the fundamentals of the existing system but substantially to widen the band, as we have done in the Bill, so that it runs from £80,000 to £200,000. That has the effect of reducing the effective marginal rate at its highest from 66 per cent.


to 60 per cent., as one of my hon. Friends pointed out. The method that my hon. Friends are suggesting would, if it were revenue-neutral, as is the essence of their proposal, leave many small companies much worse off. In the light of that, I shall be grateful if my hon. Friend will see fit to withdraw the clause.

Mr. Loveridge: In the light of my right hon. Friend's explanation that many small firms would be worse off if the clause were accepted, I shall seek to withdraw the clause. In doing so, I ask the Government to think again about the ridiculous circumstance in which a medium-size firm pays a higher rate of corporation tax than does its larger competitor. I hope that they will consider that for next year.
I beg to ask leave to withdraw the clause.

Motion and clause, by leave, withdrawn.

Clause 2

TOBACCO PRODUCTS

Mr. Brittan: I beg to move amendment No. 1, in page 2, line 15, leave out '£18·04' and insert '£19·03'.

Mr. Deputy Speaker: With this we may also discuss Government amendments Nos. 2 to 5.

Mr. Brittan: These amendments seek to increase the duty on tobacco, which we were debating last week. Since, not mach longer than a week ago, we debated at considerable length the issues behind the Government's decisions on recoupment and the application of those decisions with regard to tobacco duty, I do not think that any useful purpose would be served by my rehearsing all the arguments. If there are any particular points of detail any hon. Member would like me to consider I shall be happy to do so. I shall attempt to answer any points that may be raised.
Broadly speaking, it will come as no surprise to the House to learn that the argument I advanced last week has not been substantially altered by the passage of time since then. I commend these amendments to the House on that basis.

Amendment agreed to.

Amendments made: No. 2, in page 2, line 17, leave out '£34·29' and insert '£35·91'.
No. 3, in page 2, line 18, leave out '£29·56' and insert '£30·96'.
No. 4, in page 2, line 20, leave out '£21·92' and insert '£22·96'.
No. 5, in page 2, line 24, at end insert
'but as respects the period beginning with that date and ending with 7th July 1981 the Table set out in subsection (1) above shall have effect with the substitution for "£19·03", "£35·91", "£30·96" and "£22·96" of "£18·04", "£34·29", "£29·56" and "£21·92", respectively.'.—[Mr. Brittan.]

Clause 4

INCREASE OF DUTY ON HYDROCARBON OIL ETC.

Mr. Peter Rees: I beg to move amendment No. 6, in page 3, line 5, at end insert—
'(1A) In consequence of subsection (1) above—
(a) in sections 7 and 8(3) and (4)(c) of the said Act of 1979 and Article 3 of the Excise Duties (Gas as Road Fuel) Order 1972 (under which duty is charged by reference to the duty on hydrocarbon oil); and

(b) in section 92(2) of the Finance Act 1965 and section 14(2) of the Finance Act (Northern Ireland) 1966 (grants towards duty on bus fuel),
for the words "hydrocarbon oil" there shall be substituted the words "light oil".'.

Mr. Deputy Speaker: With this we may also discuss Government amendment No. 9.

Mr. Rees: Amendment No. 6 is consequential on the decision, which has been approved by the House, to halve the increase in the duty on derv. Subsection (a) of this amendment is designed to alter the road fuel gas duty which is normally set at half the rate for petrol and derv. This is a practical solution when the duties on the two fuels are at the same level. Since the duty on derv is now no longer at the same level as that of petrol, it is thought right to set the road fuel gas duty to half the rate for petrol only.
Similarly, the other part of the amendment is designed to cover the case of the bus fuel grant, which is again set at the joint rate of duty on petrol and derv. This amendment is designed to set it at the higher of the two rates—that is, the petrol rate only.
Amendment No. 9 marks the starting point for the reduced rate of duty on derv. It is to be set at 2 July. I have to admit that this will not become law until Royal Assent is given to the Bill and therefore, technically, the position is still covered by the original Ways and Means resolution and the Provisional Collection of Taxes Act. However—I hope that this will meet with the approval of the House—the Revenue proposes, subject to the approval of this amendment, to collect duty on derv at the new rate because it would be palpably absurd if it went on collecting it at the original increased rate and then refunded the duty following Royal Assent.

Amendment agreed to.

Mr. Cook: I beg to move amendment No. 7, in page 3, line 5, at end insert—
'(A) In section 11(1)(b) of that Act (rebate on aviation turbine fuel and heavy oil other than kerosene at rate of £0·0077 a litre less than the rate at which duty is for the time being chargeable) for "£0·0077" there shall be substituted "£0·00155".'.
We come, in this amendment, to the second attempt by the Opposition to provide a modest measure of reflation in the economy, by offering assistance to manufacturing industry. I do not think we come to this amendment at a felicitous moment for a general debate on industry in the economy but this is an important matter and worthy of some of the time of the House. It is a serious issue for industrial manufacturing processes. Unfortunately, it will remain so for the forthcoming year because of the failure of the Budget and the Finance Bill to make any attempt to solve the problem encountered by industry in meeting its fuel costs.
2.15 am
I do not pretend, as did a Conservative Member when moving an earlier proposal, that this amendment is fiscally neutral. This amendment would have an effect on the revenue, and it is pointless concealing that fact. However, that effect would be rather more modest than new clause 1. Indeed, it would cost less than half the amount involved in that new clause. To that extent, I hope that it will commend itself to Treasury Ministers.
I must also admit that there is a flaw in the amendment. Inevitably, we have included additional rebate for aviation fuel as well as a rebate for heavy oil used by industry in the manufacturing process. That flaw necessarily arises from the nature of the statute that we are seeking to amend.
I note that the Liberal Party made a brave attempt to draft an amendment that confined the additional element of rebate to heavy oil. I do not know whether that was because the Liberals put greater effort in drafting their amendment than we did or whether they happened to open their mail that morning earlier than we did. In any event, their amendment suffered the fate of many other more complex amendments in that it was not selected. Therefore, the House will be unable to divide on the Liberal amendment.
In view of the element of flaw in our amendment, we do not propose to divide the House.

Mr. Lawson: That is not much good.

Mr. Cook: The Financial Secretary must not tempt Providence. His hon. Friends would be well advised not to utter the words of provocation that fell from his lips.
We do not propose to divide the House because we recognise that our amendment is defective. However, we wish to raise with Treasury Ministers—we hope that they will respond in that spirit—the element that penalises British industrialists, in that they must bear a heavy fuel duty on the oil they use in the manufacturing process.
I recognise that this is not a new problem to Treasury Ministers. Indeed, they recognise that a problem exists. We know that because the Chancellor of the Exchequer said so in his Budget Statement. The right hon. and learned Gentleman told the House:
I recognise the strength of the representations put to me to bring the level of fuel oil duty in this country more closely into line with that of our major European competitors. I have carefully considered the case for doing so."—[Official Report, 10 March 1981; Vol. 1000, c. 776.]
Having carefully considered that case, which he recognised to be a strong one, the right hon. and learned Gentleman decided to do nothing about it. That is regrettable, because, as he recognised, Britain stands out on international comparison as having a heavy duty on fuel oil used by industry. We pay a tax of £8 per tonne on fuel oil. That is double the rate paid by any other Common Market country, with the solitary exception of the Republic of Ireland. The nearest figure to ours is the German figure of £4 per tonne, followed by the Netherlands figure of £3 per tonne. In Denmark and France, effectively no tax is levied on heavy oil used by industry in the manufacturing process.
The consequence of that differential is well known. Allied with other differentials in price, it means that British industrialists must pay a higher price for the fuel they use than their competitors in other countries, against whom they must compete for exports.
Treasury Ministers will be familiar with the NEDC study on industrial energy prices whose results came out in February. It found that for most of 1980 the heavy oil price paid by British industry was 20 per cent. above the average in Europe. As a result of that discovery, the NEDC report naturally recommended the removal of the heavy oil duty. The Opposition are more modest than "Neddy", which represents both sides of industry and is not affiliated to the Labour Party. We seek not the removal of the duty but a major reduction in its level, to remove British industry's disadvantage compared with its competitors abroad.
The effect of that disadvantage can be seen across a wide range of industry, particularly those industries that

use heavy concentrations of energy. In the past two years—I draw no inference from the period, but it is the time that the present Government have been in office—the paper and board industry has lost 20 mills and 10,000 employees. In the glass industry employment is down 30 per cent. In that time six firms have ceased operation in Britain. I am advised that they are all involved in the melting rather than the processing of glass and, therefore use much higher concentrations of energy. In the clay industry employment is down 25 per cent., and several factories have closed.
One company has closed its factory in Britain as a matter of policy and moved it to Holland, specifically to benefit from the lower energy charges there. That shift of one factory, making roofing tiles, represents the export of 40 jobs to Holland.
In his last annual report, the chairman of Thomas Marshall and Company (Loxley) Ltd, which is in the clay industry, said:
It is more and more difficult to sell abroad against competitors who are not penalised by a currency that is strong for the wrong reasons, who do not have to bear such high interest rates, and whose Governments have a more realistic approach to fuel prices.
All that we are seeking is a more realistic fuel price, which is necessary to enable British companies to compete in export markets. Tragically, it is equally necessary to enable them to sustain their present penetration of their home markets, which have been threatened by the products of foreign manufacturers, who benefit from a lower fuel price in the country of origin, a price that reflects the much lower fuel duty levied by their Governments on the oil that they consume.
It is suicidal for us to impose on our own industry a cost penalty that is higher than the cost penalty that our competitors have to bear in their own countries. Not only is it counter-productive, militating against our own industry, but it makes our companies uncompetitive in the way that the Government constantly urge British industry to cease to be. The Treasury Bench has made many statements about the important need for British industry to become more competitive. In the debate on new clause 1, the Chief Secretary told us again that it was important for British industry to achieve international competitiveness.
It seemed to come as a surprise to the right hon. and learned Gentleman to learn that we agree about the need for British industry to be competitive. However, British industry cannot reasonably be expected to accept the exhortations of Conservative Members to become more competitive if they are not prepared to take the necessary steps in those areas in which they can directly influence the extent to which our industry is competitive.
The relative level of duty on the heavy oil used by industry as an essential fuel is an important part of that international competitiveness. It is open to the Government to influence that international level of competitiveness. If they do not act, they cannot complain if other parts of industry do not take the necessary action to become more competitive. Therefore, I urge the Government to review sympathetically our points and to reconsider the many representations that they have received on this point. They have admitted that they are based on a strong and sound case.
If the Government are unable to accept the amendment, as they might be, they should at least demonstrate that they are seized of the nature of the problem and that they will


act before it is too late to rescue British industry from the consequences of having to carry a cost penalty that is not borne by our competitors.

Mr. John Wells: The hon. Member for Edinburgh, Central (Mr. Cook) mentioned in passing the paper and board industry. I propose to address my brief remarks to it. My right hon. and learned Friend the Chancellor of the Exchequer implied, in his Budget speech of 10 March, that nothing could be done about this matter—although he was sympathetic to the idea of reducing the duty—because of certain commercial agreements between the British Gas Corporation and Norwegian gas undertakings.
Since 10 March there have been fundamental changes in employment in the area in which most paper-making is situated, in Kent. I refer in particular to North Kent and to my constituency. Those fundamental changes include the threatened rundown of the dockyard in Chatham, with the loss of about 7,000 jobs over four years, the announcement of considerable redundancies in the paper industry and the possibility that the British Rail workshops in Ashford—I am glad to see my hon. Friend the Member for Ashford (Mr. Speed) in his place—will shed some 800 jobs over the next six or seven months.
That means a sharp and sudden decline in the employment prospects of those in Kent. My hon. and learned Friend the Minister, who represents Dover and Deal, will need no reminding that Kent is a peninsula. A person who lives in Warwickshire can find a job in any direction, because Warwickshire is in the middle of England and there are 360 degrees of possible travel. However, a person living and working in North Kent cannot get a job to the north because of the Thames estuary. If he lives in Deal, he will not be able to get a job to the east because the whole area to the east is wet. Therefore, in a peninsula the prospect of getting a job is strictly limited. If no attention is paid to the duty, and if my right hon. and hon. Friends do not rethink the purely commercial undertakings that have been given by a commercial concern—albeit a nationalised one—it will bode ill for employment in an area in which unemployment has suddenly risen sharply. Unless something is done for the paper industry, the prospects of an improvement will be decidedly gloomy.

Mr. Barry Henderson: The paper industry is of considerable importance to my constituents, as it is to those of my hon. Friend the Member for Maidstone (Mr. Wells). As the hon. Member for Edinburgh, Central (Mr. Cook) is not pressing his amendment and in view of the hour, I shall be brief. There are aspects of the energy policy that my constituents find it extremely difficult to understand, especially those aspects that relate to fiscal policy too. Some parts of the policies I can explain to my constituents, but others I find more difficult. I hope that my right hon. Friend and my hon. and learned Friend can make that job easier. I look forward to hearing their reply to the amendment.

Mr. Vivian Bendall: I concur with what my hon. Friends have said, that some areas of the paper industry will be affected by unemployment. The heavy oil duty is having a great effect.

Mr. Peter Rees: A powerful case has been made with his customary eloquence by the hon. Member for

Edinburgh, Central (Mr. Cook) and some strong regional cases have been made by my hon. Friends the Members for Maidstone (Mr. Wells), Fife, East (Mr. Henderson) and Ilford, North (Mr. Bendall). I am as sensitive as any Member on the Treasury Bench to the points made by my hon. Friend the Member for Maidstone.
I shall endeavour to explain why the Government have considered and rejected with reluctance the case for a reduction in the duties. It is not just because the cost is £200 million, but, as I shall explain, we have engaged in certain offsetting provisions which cost about £168 million. It is, as my right hon. and learned Friend the Chancellor of the Exchequer mentioned in his Budget speech and as my hon. Friend the Member for Maidstone has reminded the House, that the British Gas Corporation many years ago entered into a series of contracts for the supply of gas. It is regrettable that a formula was built into those contracts—one cannot level criticism against those who entered into the contracts—so that if the duty were altered by this country the price paid by the British Gas Corporation would alter, too.
If we were to accede to the amendment—much as we should like to do so in many ways—it would have the inevitable consequence that the price paid by the British Gas Corporation, and therefore the United Kingdom's gas import bill and ultimately those to whom gas is supplied through the British Gas Corporation, would be substantially increased. Thus there would be a countervailing disadvantage. It was for that reason that with extreme reluctance the Government came to the conclusion that this was not a remedial measure that they could adopt.
My right hon. and learned Friend, in his Budget, announced measures costing in all about £168 million, which is slightly less than the £200 million that the amendment would cost, aimed at helping large energy consumers. I remind the House that British Gas is holding the renewal terms until December. That means that for customers on firm contracts prices will be 10 per cent. lower by December than they would otherwise have been. The additional flexibility in pricing introduced by the electricity area boards has, to date, been taken up by 160 large energy consumers, representing 25 per cent. of total electricity consumption in England and Wales.
Coal is, and I hope will remain, the cheapest fuel for bulk industrial use and the £50 million grant scheme for converting oil-fired boilers to coal-fired boilers should help industry to take advantage of that.

Mr. Campbell-Savours: The hon. and learned Gentleman says that he is confined by an agreement made some years ago which he did not wish to criticise. Is it not possible that a system of selective rebates could be introduced for energy-intensive using industries, thereby getting round the agreement and yet resolving the problems that have been drawn to the attention of the Minister, thereby helping industry such as steel and especially the paper and board industry, because that is where there is a difficult problem to resolve?

Mr. Rees: Clear legal advice has been received. It is regrettable—I do not pour scorn on it—that that solution would not work either. I assure the hon. Gentleman that the keenest legal minds have been applied to the documents. It is a regrettable stumbling block on what otherwise would have been an attractive route to follow.


I am sure that there is unanimity in the House that this would be an attractive means of helping British industry. We are acutely aware of its problems. It was primarily for the reason that I have given that we were compelled to reject this solution.

Mr. Cook: The Minister will be aware that one of the reasons why there has been difficulty in persuading other parties of the merits of the case is that the contracts to which he refers are of a commercial character and are not in the public domain. Can he say what would be the overall added cost to British Gas as the penalty of reducing the heavy oil duty so that we may compare it with the figure that would be of benefit to British industry if a reduction were made in the duty? There is some doubt whether the additional cost to British Gas of purchasing the gas from the North Sea—which is, after all, only a part of the gas that is subsequently consumed by industry—could outweigh the advantage to all industry of a reduction across the board in the duty on the heavy oil that it consumes.

Mr. Rees: I should like to respond to the hon. Gentleman because I appreciate the concern that has been expressed, and also the reluctance of the House to accept the mere assertion by a Minister of this kind of proposition. I am unable to respond immediately, but I should like to consider the point and perhaps write to the hon. Gentleman about it. We are dealing with matters of high commercial confidentiality, and it is for that reason that I cannot lay the contracts in the Library or, indeed, refer to their terms in great detail. I hope that the hon. Gentleman will allow me to consider whether it would be possible in any way to give some idea of the formula and the likely increase of cost.

Mr. John Wells: Will my hon. and learned Friend give the house some indication of the period for which the contract will run? It is intolerable that the Government should have their hands tied, perhaps in perpetuity, to some commercial contract entered into by a commercial concern, albeit nationalised. If this is an open-ended commitment for ever and a day, we are in trouble.

Mr. Rees: As I have said, for reasons of commercial confidentiality I cannot refer in detail to the contracts. But I think I can say that they do not run for ever. I should like to consider how far it is possible to disclose to the House the relevant terms, because I appreciate that this is a matter of some importance and would enable the House more readily to come to a conclusion.
I hope that the House will forgive me if I leave the general assertion with it and see to what extent I can disclose to the House the relevant provisions, without breaching the commercial confidentiality of contracts to which the Government are not a party.
I was in the process of reminding the House of the package that my right hon. and learned Friend the Chancellor of the Exchequer announced at the time of the Budget. It may well be that the House would not consider that as a suitable offset. It was, however, the best that we were able to achieve with the money available and in the prevailing circumstances.
Much as I appreciate the thought underlying the amendment, and oppressed as I am by the considerations that my hon. Friends have urged on me, I have to advise the House not to accept it.

Amendment negatived.

Amendment made: No. 9, in page 3, line 7, at end insert
';but as respects the period beginning at that time and ending at 6 o'clock in the evening on 2nd July 1981 the rate of the duty of excise charged by section 6(1) of the said Act of 1979 shall, notwithstanding subsection (1) above, be £0·1382 a litre in the case of heavy oil as well as light oil and the provisions mentioned in subsection (1A) above shall have effect accordingly.'.—[Mr. Peter Rees.]

Clause 9

BETTING AND GAMING DUTIES

Mr. Brittan: I beg to move amendment No. 10, in page 5, line 28, after '9', insert—
'(1A) In section 1(2)(b) of the Betting and Gaming Duties Act 1972 and section 17(1)(b) of the Miscellaneous Transferred Excise Duties Act (Northern Ireland) 1972 (general betting duty on bets other than on-course bets) for the words "7½ per cent." there shall be substituted the words "8 per cent.".'.

Mr. Deputy Speaker (Mr. Ernest Armstrong): With this it will be convenient to discuss Government amendments Nos. 11, 12, 13, 195 and 196.

Mr. Brittan: These amendments relate to matters that we debated last week. I shall treat them in a similar way to the tobacco duty amendments that we dealt with recently.
These amendments enact in legislative form the changes to the betting and gaming duties which were the subject of the Ways and Means resolutions that we debated through the night just eight days ago. In those debates we had the opportunity to consider the matter very fully. At that stage I tried to deal with the points of detail that arose. Again, as with the case of the tobacco duty, the same matters arise tonight. I shall confine myself to moving the amendment briefly, but I am ready to deal with any points with which the House would wish me to deal at this stage.

Mr. Cook: As the Chief Secretary said, we debated the substance of these amendments fully last Monday. I do not think that it will be necessary for the House to debate them at the same length on this occasion. In my case, I unfolded to the House the sum total of my knowledge and wisdom about betting and horse-racing last Monday, and I have nothing to add to what I said then.
However, it is worth putting it on record that the Opposition continue to regard the charges contained in these amendments both as unnecessary, in that they attempt to recoup a small sum of money on a meticulous understanding that the PSBR is carefully balanced and cannot afford a margin of error of less than £20 million in either direction, and as discriminatory in their nature, in that what we are doing in these amendments is increasing the duty on horse-race betting and on bingo but not increasing it on those who participate in gambling in casinos. The latter tend on the whole to be the kind of persons who can perhaps more readily afford the increase in duty, and ironically the Royal Commission on Gambling came up with the casinos as the particular sector of the gaming industry which could most readily and most appropriately bear a substantial increase in duty.
For those reasons, we remain unpersuaded of the case for these amendments.
As the Chief Secretary will recollect, in our debate last Monday one or two of my hon. Friends who had, perhaps, more first-hand experience of betting and horse racing than myself advised him on the consequences of the Ways and Means resolution that he was then moving, which provided for these increases in duty. Since then I think that most hon. Members will have received a letter from Ladbroke's. Ladbroke's can certainly claim considerable knowledge in this field, although one recognises that it is not necessarily an impartial witness concerning increasing the duty in its industry. But Ladbroke's speaks from firsthand knowledge of its industry.
As Ladbroke's has pointed out in a memorandum to all hon. Members, it believes—after all, it has a firm basis of knowledge on which to found its belief—that this increase in duty will
undoubtedly create problems for many sections of the racing industry. It will also create problems for the Home Secretary through an increase in illegal gambling.
Ladbroke's even includes an intriguing quotation from the Chancellor, of which the House should be aware before it passes these amendments. Speaking on 10 April of this year, a mere three months ago, the Chancellor said:
Any further significant increase in gambling taxes would fail to raise anything like the amount of extra revenue needed and it would risk driving gambling underground into the hands of the criminal world.
That is a view which has now been expressed not simply by Ladbroke's and the Opposition Front Bench but also by the Royal Commission on Gambling, which was set up to examine these very questions. That is a formidable array of opinion against which the Chancellor and the Treasury Bench are pushing out their own boat in opposition to the tide of general opinion as to the consequence of the increase in duty.
We argued these points last Monday. We divided last Monday. We do not propose to divide the House again tonight on the same issue. We have made our marker plain, expressed our view and put on record the view of those who know the industry at first hand. The Chief Secretary cannot but be aware that in a year or two we shall want to return to the issue to discover whose speculation on the consequence of the amendments has proved correct and whether the consequence for the racing industry and the gambling industry turns out as those with first-hand knowledge have predicted or whether the more optimistic claims of the Treasury Bench are borne out by the facts.

Mr. Brittan: I shall look forward to resuming combat in a year or two on these issues. I would have left the matter there had the hon. Gentleman not mentioned some observations by my right hon. and learned Friend the Chancellor of the Exchequer which I do not think he has represented accurately in the context in which they were made.
My right hon. and learned Friend was referring to questions raised at the time about petrol duty and its impact on certain sections of the community. It was in the context of achieving the recoupment of any change in petrol or derv duty that the question of gambling was considered. My right hon. and learned Friend was seeking to indicate that the scope for recoupment derived from an increase in the gambling duties was limited. So it has proved. Here, the betting and gambling duties that are increased raise,

in total, only £20 million. There is nothing inconsistent in what my right hon. and learned Friend said at the time and what is being done today.

Mr. Freud: I am sure that all hon. Members have seen the letter from Ladbroke's. I wonder whether the Chief Secretary will give an assurance that he intends to monitor carefully the gaming receipts. If there is a diminution in the volume of betting, it will surely have been incredibly silly to allow such a small sum of money to kill the goose that lays such golden eggs for the Treasury.

Mr. Brittan: I am happy to assure the hon. Gentleman that in this matter, as in all revenue matters, we shall continue to watch the golden eggs with great care.

Amendment agreed to.

Amendments made: No. 11, in page 6, line 2, at end insert—
'(2A) In section 17(2) of the Betting and Gaming Duties Act 1972 (bingo duty)—
(a) for the words "7½ per cent.", in both places where they occur, there shall be substituted the words "10 per cent."; and
(b) for the words "three thirty-sevenths" there shall be substituted the words "one-ninth".
(2B) In section 23(1) of the Betting and Gaming Duties Act 1972 (rates of gaming machine licence duty)—
(a) in Table A (premises with local authority approval) for "£20", "£25" and "£100" there shall be substituted "£25", "£60" and "£120" respectively;
(b) in Table B (premises without local authority approval) for "£50" and "£300" there shall be substituted "£75" and "£400" respectively, and, as respects machines chargeable at the higher rate, for the entries in the second and third columns there shall be substituted "one or more machines" and "£200 per machine" respectively.
(2C) In the Table in section 44(4) of the Miscellaneous Transferred Excise Duties Act (Northern Ireland) 1972 (rates of gaming machine licence duty in Northern Ireland) for "£50" and "£300" there shall be substituted "£75" and "£400" respectively, and, as respects machines chargeable at the higher rate, for the entries in the second and third columns there shall be substituted "one or more machines" and "£200 per machine" respectively.'.
No. 12, in page 6, line 8 leave out subsection (4) and insert—
'(4) Subsection (1A) above shall be deemed to have come into force on 12th July 1981, subsections (1) and (2) above shall be deemed to have come into force on 1st July 1981, subsection (2A) above shall be deemed to have come into force on 27th July 1981 and subsections (2B) and (2C) above shall come into force on 1st October 1981.'.
No. 13, in schedule 5, page 122, line 4 leave out "7(1) and 8' and insert 'and 7(1)'.—[Mr. Brittan.]

Clause 12

REGISTRATION

Mr. Lawson: I beg to move amendment No. 14, in page 7, line 37, leave out
'forthwith notify the Commissioners'
and insert
'notify the Commissioners without delay'.
My right hon. Friend the Member for Crosby (Sir G. Page) will know that this amendment, which is so straightforward that it requires no explanation, is made in response to an undertaking I gave in Committee.

Sir Graham Page: I rise only to say that I am very much obliged to my right hon. Friend.

Amendment agreed to.

Clause 13

GOODS ACQUIRED BEFORE INCORPORATION

Mr. Lawson: I beg to move amendment No. 15, in page 8, line 12, at end add
'or on the supply of services before that time for its benefit or in connection with its incorporation'.
This amendment again arises out of a debate in Standing Committee. The purpose of the amendment is to extend the scope of clause 13 to enable the Commissioners to make regulations granting relief from value added tax on pre-registration services as well as on goods. When the clause dealing with goods was debated in Committee, a number of my right hon. and hon. Friends, especially my right hon. Friend the Member for Crosby (Sir G. Page) and my hon. Friend the Member for Croydon, South (Sir W. Clark), asked that this should be extended to services. The purpose of the amendment is to meet the point.

Amendment agreed to.

Clause 14

VALUATION: SPECIAL CASES

Mr. Lawson: I beg to move amendment No. 16, in page 8, leave out lines 19 to 24 and insert—
'(b) the person making the supply and the person to whom it is made are connected, and
(c) the person to whom the supply is made is not entitled under sections 3 and 4 of this Act to credit for all the tax on the supply,
the Commissioners may direct that the value of the supply shall be taken to be its open market value.
(2) A direction under this paragraph shall be given by notice in writing to the person making the supply, but no direction may be given more than three years after the time of the supply.
(3) A direction given to a person under this paragraph in respect of a supply made by him may include a direction that the value of any supply—
(a) which is made by him after the giving of the notice, or after such later date as may be specified in the notice, and
(b) as to which the conditions in paragraphs (a) to (c) of subparagraph (1) above are satisfied,
shall be taken to be its open market value.
(4) For the purposes of this paragraph any question whether a person is connected with another shall be determined in accordance with section 533 of the Income and Corporation Taxes Act 1970.
(5) This paragraph does not apply to a supply to which paragraph 9A below applies.'.

Mr. Deputy Speaker: With this we are to take also Government amendments Nos. 17, 18, and 197.

Mr. Lawson: These amendments, too, follow the debate in Committee. What might be termed the anti-avoidance measures involved in what is now clause 14 were criticised in certain respects, although the intention of blocking this avoidance device was fully recognised. We reflected on the arguments that were advanced in Committee and have introduced a new formulation which we believe will meet the criticisms that were made upstairs. It will restore the right of appeal by individual taxpayers against any direction issued by the Commissioners under paragraphs 1 and 2 of schedule 3.

Amendment agreed to.

Amendments made: No. 17, in page 8, leave out lines 32 to 36 and insert—
'(b) the person importing the goods and the person entitled to the price are connected, and
(c) the person importing the goods is not entitled under sections 3 and 4 of this Act to credit for all the tax paid or payable by him on the importation,
the Commissioners may direct that the value of the goods shall be taken to be their value as determined in accordance with the said subsection (3).
(2) A direction under this paragraph shall be given by notice in writing to the person importing the goods, but no direction may be given more than three years after the time of importation.
(3) A direction given to a person under this paragraph in respect of goods imported by him may include a direction that the value of any goods—
(a) which are imported by him after the giving of the notice, or after such later date as may be specified in the notice, and
(b) as to which the conditions in paragraphs (a) to (c) of subparagraph (1) above are satisfied,
shall be taken to be their value as determined in accordance with section 11(3) of this Act.
(4) For the purposes of this paragraph any question whether a person is connected with another shall be determined in accordance with section 533 of the Income and Corporation Taxes Act 1970.'.
No. 18, in page 9, leave out lines 23 to 26.—[Mr. Lawson.]
Further consideration adjourned.—[Mr. Cope.]

Bill (as amended in the Committee and in the Standing Committee) to be further considered this day.

Mr. Deputy Speaker: Motion No. 4 on the Order Paper.

Mr. Freud: On a point of order, Mr. Deputy Speaker. The Orders of the Day and Notices of Motions clearly say that the Films (Quotas) Order would be debated.

Mr. Deputy Speaker: I cannot compel an hon. Member to move it.

Mr. Freud: Further to that point of order, Mr. Deputy Speaker. If it is not moved, presumably it will go to the Joint Committee on Statutory Instruments, which will have to table the motion. As that Committee meets on a Wednesday, there is no way in which the statutory instrument can be debated in this Session of Parliament. Perhaps the usual channels, who seem, with gross discourtesy, to have done a deal in some distant part of the House without notifying hon. Members, will explain why they thought it important enough to put this statutory instrument on the Order Paper but now think it so unimportant that it will not come up in this Session of Parliament.

Mr. Deputy Speaker: I understand that whether it goes to the Joint Committee on Statutory Instruments is a matter for the House to decide. It cannot go there without a decision by the House.

Mr. Freud: Cannot we be told why it has been withdrawn? The Minister is sitting on the Front Bench.

Mr. Deputy Speaker: It is not a matter to be debated.

Pool Competitions

The Minister of State, Home Office (Mr. Timothy Raison): I beg to move,
That the draft Pool Competitions Act 1971 (Continuance) Order 1981, which was laid before this House on 21st May, be approved.
The purpose of the draft order is to extend the Pool Competitions Act 1971 for a further period of 12 months to July 1982. In 1971, when the Act was passed, it was limited to five years, but it contained provision for its extension by order for up to a year at a time, and it has been extended in each of the years from 1976 to 1980.
The House will remember that the 1971 Act was introduced to safeguard the position of certain charitable and sporting pools which gave prizes based on the outcome of sporting events, mostly football matches. They differ from football pools in that, instead of selecting teams each week, competitors hold a permanent selection of numbers which are assigned each week to football teams, and winners are determined by reference to the results of the matches. The Spastics Society and other medical and sporting charities derive substantial income from these competitions.
It was held in a House of Lords judgment that these competitions were not, as had been supposed, a lawful form of pool betting, but that they were unlawful lotteries. A number of worthy causes depended substantially on the funds generated by these competitions, and the 1971 Act was passed to safeguard their position until a permanent solution could be found.
The present situation does not suit anyone. It does not suit the organisations concerned because of the uncertainty that they have about the future of these competitions. It is unfair to any other organisation which might consider running such a competition but is prevented from doing so because the Act applies only to competitions being run in 1970. Nor is it right that Parliament should be asked to go on approving extension orders indefinitely.
When a similar order was debated last year, I said that it was proposed to invite the organisers of these competitions to discuss with the Home Office the scope for a permanent and satisfactory resolution of the temporary arrangements for which the Act provides. Useful discussions have been held. It had been thought that the doubling of the monetary limits on lotteries, which took effect on 1 July, might have enabled some organisations to dispense with these competitions. However, in most cases the income from these competitions is still considerably in excess of what they could raise from ordinary lotteries.
The House would not, I am sure, wish to curtail the valuable work being done by bodies such as the Spastics Society by cutting off this part of their income. However, the long-term choice is between banning such competitions altogether, with serious consequences to the organisations concerned, or putting them on a permanent footing open to any organisation, subject to a system of licensing and control administered by the Gaming Board for Great Britain and with appropriate safeguards which would prevent the general availability of such schemes from stimulating a significant increase in the turnover of money expended in this way.
My right hon. Friend the Home Secretary therefore intends that our officials should pursue their discussions

with the six organisations which still benefit from such competitions with a view to making proposals for permanent legislation which would enable these competitions to retain their distinctive character while making them generally available, subject to safeguards, to other organisations.
I am sure that we are all agreed that this temporary legislation cannot go on being extended indefinitely. A lasting solution must be found and my right hon. Friend is taking steps to that end, although I cannot say when it will be possible for permanent legislation to be introduced. Meanwhile, I ask the House to approve the draft order and extend the Pool Competitions Act 1971 for a further year.

Mr. John Hannam: I hope that the House will approve the order. The amounts involved for the charities are enormous. It is essential that the major charities, many of which are hard pressed in these economically difficult times, should continue to obtain income from the pools.
The Spastics Society relied on pools to raise about £800,000 this year. Action Research for the Crippled Child will raise about £500,000. Pools are essential to such worthwhile organisations. The amounts raised would be higher if the uncertainty were removed and we could agree on legislation and put the system on a proper basis.
In the debate last year, the Minister said that new proposals would be forthcoming and that discussions would take place with the charities. He has confirmed that meetings have taken place. I am informed that they took place only after repeated requests and telephone calls from the organisations involved. In March a Home Office official had discussions with the Spastics Society and stated that before the renewal order came before the House a meeting would take place with the Minister. No such meeting has been arranged. I should be grateful if my hon. Friend could clarify the position. I hope that he will have discussions so that the organisations can consider the draft legislation. In that way we can safeguard the vital income from pools competitions.
Last year the hon. Member for Isle of Ely (Mr. Freud) expressed anxiety about the high running costs of some of the pools promoters. It was suggested that people who contributed to charity football pools were being fiddled. I understand that the promoters—certainly in the case of the Spastics Society—print costs clearly on the pools sheet to show exactly how much of the contributors' money reaches the charity. A figure for operational costs of about 38·3 per cent. was quoted. That was taken as a percentage on the net income rather than the gross income, which is the normal method of assessing costs under the Lotteries and Amusements Act 1976. Therefore, the percentage which we should consider would be about 5 per cent. less than the 38 per cent.
It should also be remembered that the average charitable takings are 15p rather than the £1 average for normal commercial pools. From that the collectors who give up their time to go round weekly collecting those small amounts receive a 25 per cent. commission.
Therefore, I hope that no one will be under the misapprehension that in some way those charity pools are a rip-off for the promoters because those facts show, as with many of the local government lotteries, that the costs are high when the amounts being contributed are low, as distinct from the running of the major pools where he average amount contributed is about £1 per person.

Mr. Clement Freud: Does the hon. Member accept that when someone gambles in a football pool he does so in the full knowledge that the prize winners and the pool promoters will benefit, whereas when one buys a ticket for a specific charity one is not made aware of a number of other people who benefit? Is he further aware that, of a total of £23 million which was netted by the six organisations which now remain, only £3·5 million went to charity?

Mr. Hannam: What I am trying to point out is that the percentage amounts which go to charities are clearly shown to the people who are contributing. The costs of administration of such a pool are high. That has to be accepted and admitted. However, I do not believe that those costs can be avoided. The charitable organisations with which I have been concerned have taken great pains to ensure that all the details of the costs are investigated and verified. I know that the hon. Member has expressed doubts. No doubt he will do so again in the debate. I felt that it was important to give some of the facts, which the charitable organisations are anxious should be made known to hon. Members.
Earlier tonight we heard of the problems caused to charities by VAT and inflation. I hope that it will be appreciated that this is an important order and that if we fail to pass it those charities will face a grave financial crisis. I hope that the order will receive the support of the House.

Mr. Clement Freud: I have always felt that one should be guided by the merits of an argument rather than the lateness of the hour. I feel that this is an important matter. I genuinely feel that the Minister of State, Home Office has read a shoddily prepared brief without much verve. It is time that the House considered the inadvisability of allowing Governments to postpone legislation from year to year.
This Act was brought in in 1971 as a response to the decision in the House of Lords in the case of Singette Limited and others v. Martin. In its judgment, the other place ruled that the operations of Singette were illegal and that that was contrary to the general belief at the time of the judgment. That decision was based on the difference in law between legal pool betting and illegal lotteries. In practice, both involve the entrant putting a stake into a pool from which expenses are deducted and prizes paid. In a lottery, the winner is determined by chance, and in a pool the entrant must exhibit an element of skill.
The sort of pool operated by Singette involved the entrant making one forecast which remained the same for many weeks. The other place decided that that did not involve a regular forecast and that, therefore, the element of skill was minimal. On that basis, Singette and others were breaking the law because they constituted a lottery and not a pool betting system.
In Committee, on 12 May 1971, the present Secretary of State for Education and Science, then a Minister in the Home Office, said:
The essential difference is that, in the case of a lottery, the winners are determined by lot or chance, whereas in the case of pool betting, entries must comprise a forecast".
That was accepted by the House.
A proportion of the money raised by the operations went to registered charities, notably the Spastics Society and sports associations. Nobody wanted the charities to

suffer. The House of Lords judgment would have deprived such organisations of funds. That was the major factor given by the junior Minister for introducing a Bill to legalise such operations. He continually stressed that the measure was temporary—a specific reaction to a specific judgment.
The Act was to have a life of five years only, subject thereafter to an annual extension. During the five-year period the charities and other benefiting organisations were to find other ways to raise the funds that they received from the pools. The House, with total wisdom, said that that was to be done. The life of the Act was to allow time for investigation into the whole sphere of lotteries and their operation.
The Minister said:
I hope that the organisations concerned will take a warning—namely, that the Bill is allowing them a breathing space and that, during that breathing space, they should seek to diversify their sources of income.
When the Act was introduced it was generally accepted that the judgment of another place could not be allowed to stand because of the financial harm that it would do to worthy causes. The Minister was not wholly happy about the introduction of such a measure because it lacked principle. He said:
the Bill is based on expediency far more than on principle…I concede at once that it is on the basis of expediency that I commend the Bill. I feel that that basis is the only one on which it can be justified."—[Official Report, 12 May 1971, Vol 817 c. 566–587.]
The Royal commission on Gambling, reporting in 1978, saw no reason for the Act to be continued and discounted the argument used by the Government to extend the life of the Act—namely, that charities needed it. The Rothschild commission said that they should raise funds in some other way. In paragraph 15.14 it said:
There is no doubt about the merits of the deserving causes, mainly in the field of medical research, which benefit from these pools. Nor should any charity be deprived of the right to benefit from this form of fund raising if it were agreed to be necessary or desirable.
The reasons for that dislike were that, first, other charities and organisations could not join the elite bandwagon of those able to benefit from pool competitions—the seven pools, now reduced to six. Secondly, if other charities managed without, all of them should be able to do so. The report said in paragraph 15.17:
There is no case for allowing the Pool Competitions Act 1971 to continue beyond July 1979 and the activities of the companies licensed to promote charity supporting pools should in any event not be allowed to continue in their present form for more than a limited period. They will, we believe, continue unchanged until July 1979. We recommend that the Pool Competitions Act 1971 should not be extended after that date and simply be allowed to lapse.
Despite the contributions that the operators make to the charities being only a very small percentage of their turnover, they are a very large percentage of the income of the charities. The Spastics Society estimates that about 10 per cent. to 12 per cent. of the money it receives from public sources comes from pool competitions. The figure is about £800,000 a year. Without that, its services would obviously be curtailed. That information comes from a sheet provided by the Spastics Society. Under the 1976 Act the society is restricted from raising comparable amounts under lottery schemes similar to those run by other charities.
This is now the tenth year of the Act's life. That is twice as long as was originally intended. Are we to go through this procedure every year? Are we going to forget about it like the Incitement to Mutiny Act 1797 until another law case brings it to our attention?
The Home Office has said on every occasion—the Minister and I have met on these occasions over the years and I have met previous Ministers—that a review is pending or that it is giving the charities just one more year. It was jolly useful for it when the Rothschild commission was about to report. Last year really was the last year when, in all fairness, these six elitist swindles, fiddles, cons, call them what one will, should have had their lives.
When will we have consolidating legislation covering the whole area of pools and lotteries? During the first debate on the order after the Rothschild commission had reported, the Minister said that the Home Office would consider the proposals in the report but that he did not know how long it would be before its views were formed on the views of the Royal Commission. We still have not had the response of the Home Office. That is the response to the recommendation to allow the Act to lapse.
Sections 10 and 11 of the Lotteries and Amusements Act 1976 restrict the amount of money that can be raised in each lottery and the number of lotteries that can be held each year. The present figures—they have been increased this year—allow a maximum of £10,000 to be raised on each occasion and for 52 events to be held in any one year. This is still less than the sum that the Spastics Society receives from pool competitions. It would not have been very difficult to scrap the Act and allow the charities, simply by raising the limit, to continue receiving money and to continue to do their good work.
What is worrying to me about the Act is the small percentage of the proceeds that goes to the charities and sports associations. As I intended to speak in the debate, I did not interrupt more than was strictly necessary. I did so on only one occasion in response to a contention voiced by the hon. Member for Exeter (Mr. Hannam), who has a constituency interest in one of the firms.
The figures that were obtained from the Gaming Board for Great Britain for the financial year 1980, which are the last available figures, for the then seven operators reveal that total proceeds were £23 million, of which £5 million went in prizes, £6 million in duty, £8 million in expenses and only £3·5 million in donations to charities. That is about 15 per cent. When someone buys a £1 ticket for what he thinks is a charitable contribution included in an element of gaming, betting or lottery, 85 per cent. goes to other causes than the one whose name is on the ticket.
It is clear that many people are being misled into buying tickets by thinking that a large amount of the cost of the tickets will go to the charity. I ask whether the operators are not making too much money behind a very respectable front while not being nearly as benign as people might think.
Top Ten Promotions in the financial year 1980 had total proceeds of £7·5 million and made donations of £1,790,000. ask whether the entrants know how much of their fee goes to good causes. I wonder whether they would mind if they did. I said when the measure was debated last year that it was a fiddle. I do not want to repeat my argument, which is to be found in Hansard at columns 1920–21 on 19 June 1980.
We need a change in existing laws, such as the Lotteries and Amusements Act 1976, which does not allow, even

with the increased figures of this year, the charities to raise as much as the £800,000 raised for the Spastics Society from the proceeds under the Act. We could then allow a bad anomaly to lapse.
The Government so far have failed to do anything constructive for charities in the International Year of Disabled People. There has been the odd minuscule contribution towards an increase which would probably have been given anyway. The Minister shakes his head. Can he mention a single constructive benefit which came especially because of this year and would not have come normally with the generosity that Governments usually show in their first two years of office?
I end by quoting the Minister's words last year, when he said:
Active consideration is being given to the question of when we should bring in new legislation.
He also said:
We cannot possibly tackle everything at the same tune;"—[Official Report, 19 June 190; Vol. 986, c. 1924.]
and claimed that 1980 was a busy legislative year. Will he use that same feeble excuse again? I realise that towards the end of this parliamentary year there are many late sittings, but he surely cannot say that there has been so much legislation that he has been unable to have some of his civil servants and advisers look into a viable alternative to a heavily outdated measure.

Dr. Shirley Summerskill: The Act began life in Parliament as a temporary measure, but it has become an annual ritual. The reason for extending the Act after its first five years was that we were waiting for the Rothschild report. That report came out in July 1978. The Minister has now had more than two years since the Government came to office in May 1979 to decide what response to make to the Royal Commission's conclusion, which was quoted by the hon. Member for Isle of Ely (Mr. Freud). The Royal Commission recommended that the Act should not be allowed to extend after July 1979 but should simply be allowed to lapse. It expressed strong reservations about the methods used by the charities supporting pools and criticised those methods as thoroughly undesirable.
There is a great deal of sympathy in the House and outside for the aims and objects of the worthy charities which the Act helps, especially the Spastics Society and certain medical research. It is appreciated that a total of some £3·75 million is raised on behalf of these charities.
Even the charities, however, claim that the uncertainty of the present annual renewal by Parliament is detrimental to their organisation. They are never sure from one year to the next whether the Act will continue. That is bound to affect their income and the recruitment of permanent staff. They are unable to regularise their affairs. There is no evidence that they are even trying to raise money by alternative means. Perhaps the Minister has such evidence. If so, what success are they having? Are they retying entirely upon this Act to see them through indefinitely? Their view seems to be that the Act should become permament legislation. They want this special treatment established on a regular basis.
The Minister has said that the present situation does not suit anyone, which is true. It seems that in the last year there has been very little progress apart from discussions. There has now been a period of more than two years since the Government took office for discussions to take place


between the Home Office and the organisers of the competitions to decide on the best permanent, satisfactory resolution of the temporary arrangements for which the Act provides.
The Minister stated in the last debate on this matter that he would start discussions. He said just now that useful discussions have been held. I have been given permission to quote a letter from the Spastics Society in which, apart from pointing out that the discussions had to be initiated by the charities and were not initiated by the Government, it is stated that
nothing of substance has emerged from these meetings",
meetings which the Minister calls useful.
The society is aware that the House finds these annual renewal orders tedious and time-consuming. It seems that the society feels that it is not getting anywhere with the Home Office in spite of the meetings. However, the Minister has told us that he intends to pursue discussions. What can possibly come out of pursued discussions? Surely the Government now know the views of the charities. I think that there have been three meetings. What more is there to find out about their attitude? Surely now the only course is for the Government to finalise their view on how to proceed, whether to renew the order annually, whether to allow it to lapse as recommended by Rothschild, or whether to introduce permanent legislation.
I hope that the debate will encourage the Minister not simply to say that for another year he will pursue discussions but to tell us now that during the year he and the Government will reach a definite conclusion about their proposals to replace this annual ritual.

Mr. Raison: I think that this short debate has shown a certain anxiety on the part of all who have spoken that we should get on with this matter. I think that that has been the theme of the debate. My hon. Friend the Member for Exeter (Mr. Hannam) rightly stessed the value of the money that is raised. That point came over during our debates in the two previous years. It is argued that the money could be raised equally well by lotteries, because the limits on the lotteries are raised, but I am advised that this is a still more effective way for these organisations to raise the money. I think that they regard this provision as useful.
The hon. Member for Isle of Ely (Mr. Freud) asked in passing what the Government had done for disability during this year. He then cleverly advanced the point that

they would have done something for disability anyway, thus putting himself in an impregnable position. My right hon. and learned Friend the Chancellor of the Exchequer has, of course, introduced decidedly useful benefits for the disabled.
The crucial point to be faced is that of timing. The House knows that I cannot say when we shall introduce legislation, but I made it clear during my speech that that is our intention. Obviously, that must be discussed with the people concerned—

Dr. Summerskill: The Minister is making the same speech as he made last year to the effect that he cannot give the House the timing of legislation. No one has asked him for the timing. We simply want to know what form the legislation will take. What conclusions have the Government reached?

Mr. Raison: I cannot say more than I have said. We have to complete our discussions before we can come forward with legislative proposals.
The hon. Member for Isle of Ely attacked the promoters of these pools, I think it would be fair to say, on the ground that they are making excessive profits for themselves. The uncertainty, which I acknowledge exists, about the future of these competitions has resulted in something of a stalemate. As far as I am aware, the charities and sports organisations concerned are satisfied, with their pool promoters. If they were not satisfied they could hardly consider making a change when they could never be sure that the competitions would be able to continue for more than another 12 months.
If the pool competitions were to be on a permanent basis, which is our aim, and made available to more organisations, their promotion would no doubt become more competitive and any organisation that thought it could get a better return from other promoters would be free to make a change of this kind.
I accept that we have to get on with this. The present situation is unsatisfactory and I am not trying to argue otherwise. We have many other legislative priorities. As the hon. Member for Halifax (Dr. Summerskill) has acknowledged, I cannot say what is to be in the legislative programme in any Session. I have listened to the debate and sense that hon. Members on both sides want to get on with this. I shall do what I can to respond to that feeling.

Question put and agreed to.

Resolved,
That the draft Pool Competitions Act 1971 (Continuance) Order 1981, which was laid before this House on 21st May, be approved.

Friendly Societies Bill

Order for Second Reading read.

The Financial Secretary to the Treasury (Mr. Nigel Lawson): I beg to move, That the Bill be now read a Second time.
The purpose of this Bill is to repeal the requirement in section 2(1) of the Friendly Societies Act 1974 that the Chief Registrar of Friendly Societies must be a barrister of at least 12 years' standing or a person who has held the office of assistant registrar for at least five years.
The Chief Registrar, who is appointed by my right hon. and learned Friend the Chancellor of the Exchequer, is responsible for the prudential supervision of building societies and various other bodies. These include industrial assurance companies and societies, societies registered under the Friendly Societies Act 1974, and societies registered under the Industrial and Provident Societies Act 1975. Of these, building societies with assets of £50 million are far and away the most significant.
The requirement in the Friendly Societies Act 1974 that the chief registrar should be a barrister had its origins in legislation in the nineteenth century, when the balance of responsibilities of the registry was very different. This is no longer essential, since the responsibilities of the office have increasingly become the prudential supervision of friendly, industrial and provident societies and, in particular, building societies.
A legal qualification is still undoubtedly an asset and the Bill will open the office to solicitors, among other people. We felt that the main requirement was to secure the best possible candidate to deal with the supervisory responsibilities, and, we having decided to ask the House for primary legislation, the Bill therefore opens the field, without restriction. However, all other things being equal, we should clearly prefer a candidate with some legal qualifications.
I assure the House that the Government are not proposing to dispense with the statutory legal qualifications altogether as far as the registry is concerned since subsections (2) and (3) of section 2 of the Friendly Societies Act 1974, which we are not proposing to amend, will still require at least two assistant registrars to be legally qualified.
The importance of the societies supervised by the chief registrar, particularly the building societies, needs no emphasis. Effective prudential supervision of building societies is in the interests of those who have deposits and mortgages with them. Given these important responsibilities of the office, it is desirable to have the widest possible choice in selecting the person who will occupy it.
The present chief registrar, Mr. Keith Brading, is to retire in the near future. I am sure that the House would wish my right hon. and learned Friend the Chancellor of the Exchequer to have the widest possible choice in selecting a worthy successor to Mr. Brading, who has been a quite outstanding holder of his office and whom it will be hard to replace.

Mr. Robin F. Cook: The Bill eliminates restrictive practice, albeit one of rather limited effect. Therefore, it will not surprise the Financial Secretary if I indicate that the Opposition have no intention of resisting it.
I have given some thought to whether there would be any way in which to demonstrate constructive opposition to the abolition of this restrictive practice, but, after giving the matter some reflection, I have failed to come up with any ground on which one could resist its abolition. I am therefore happy to accept the Bill without exception. I note that the Bar Council, having considered the matter, decided that it had no objection to the elimination of this restriction. If the Bar Council does not feel sufficiently strongly to retain this post for its own members, it is certainly not for me to defend its right to have a prerogative lien upon this post.
However, the Minister will be aware that the Building Societies Association has expressed some unease at the proposal. It has put out a public statement saying that the post calls for considerable legal expertise and knowledge. As the right hon. Gentleman indicated, prudential supervision of the building societies is the major function of the Chief Registrar of Friendly Societies.
I am grateful to the Financial Secretary for confirming that two assistant registrars will remain legally qualified. I should not have thought that the Chief Registrar, even were he not a lawyer of any kind, would be likely to be starved of legal expertise or advice from those around him.
I can see advantages in the Chief Registrar coming from another discipline—perhaps the accountancy profession. This matter has often been reflected upon, particularly in the Public Accounts Committee, and it is recognised that we have a public service in which the representation of qualified accountants with practical backgrounds outside the public profession is remarkably few. Perhaps in this case the accountancy profession could fulfil the role of Chief Registrar with rather more appropriateness than a barrister of 12 years' standing.
We appreciate that the Bill has been introduced late at night in the latter part of the Session. It is not usual to find a Government Bill brought in on 14 July and starting its stages through Parliament at 3.30 am halfway through the last month before we rise for the Summer Recess. It therefore goes through our mind that there is some purpose to the Bill and that some obstacle is being removed, perhaps for a purpose that has already been conceived.
We note that the Bill is being promoted by the Treasury, which presumably has a view on who should be the replacement for the present Chief Registrar when he steps down in the near future. It seems that the Government are seeking wider powers in the Bill in order to give, as the press notice put it, a "wide range of choice" of successor to the present Chief Registrar and future successors. It is laudable that the right hon. Gentleman should be seeking that wide range of choice, and I hope that he will exercise the wide range of choice that will be available to him after the Bill goes through all its stages. However, it would be a matter of regret if, having been granted this wide range of choice, the Minister exercised a choice which resulted in the appointment of someone even nearer home than someone appointed under the strict application of the present restrictions on the holders of the post.
I welcome the Bill. I am happy to support it. We urge the Financial Secretary, when he obtains his powers, to make sure that he exercises his wide range of choice and looks far from Whitehall when he makes the appointment.

Question put and agreed.

Bill accordingly read a Second time.

Bill committed to a Committee of the whole House.—[Mr. Brooke.]

Bill immediately considered in Committee; reported, without amendment.

Motion made, and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 56 (Third Reading), and agreed to.

Bill accordingly read the Third time and passed.

Tennis (Sports Council Report)

Motion made, and Question proposed, That this House do now adjourn. [Mr. Brooke.]

Mr. Arthur Davidson: Just after 3.30 am is no time to be discussing tennis, and certainly no time to be playing it. Perhaps poker is the only appropriate sport to indulge in at such an ungodly hour. However, I am most grateful to the Under-Secretary for being here. I am anxious to hear what he has to say on this important topic.
I raise the matter because once again another Wimbledon has gone by. Millions of people have enjoyed it and have been transfixed by it. Yet there has been a tinge of regret, since, as happens all too often, British players have failed to get anywhere near the finals.
The thousands of youngsters who have enjoyed watching the game on television, and who have ventured on to a court as a result of the enthusiasm engendered by watching, will, ironically, have less opportunity than in most other Western countries to play the game to a worthwhile level or be encouraged to do so.
Sad to say, over the years this great sport has been badly served by those who run it. I say this with regret, because I have a love for the game and would like to see it become a much more popular participant sport and less of a middle-class preserve.
These strictures and ambitions are supported by the Smith committee, which was set up by the Minister's predecessor, and which reported in June 1980 on the state of British lawn tennis. The report was laced with criticisms of the way in which one of our major sports was administered at every level. It waxed indignant about the shortage of covered and all-weather courts and on the poor lawn tennis facilities generally. The report was critical of the abysmal standards and shortage of coaching, and, ironically, the under-use of the existing courts, whether school, local authority or private club.
The Lawn Tennis Association, the game's governing body, and the All England Lawn Tennis and Croquet Club, the organiser of the Wimbledon championship and, as a result the main financial contributor to the LTA, did not and could not escape a share of the criticism.
The committee's criticisms are all the more relevant because it could hardly be said that it was composed of wild-eyed, anarchic revolutionaries, determined to rock the establishment. The committee's members included Mr. John Smith, chairman of Liverpool Football Club, three ex-chairmen of the Lawn Tennis Association and two tennis players of distinction, who have given great service to the game. I refer to Mr. Paul Hutchins, manager of the British Davis Cup team—I am sure that the Minister will join me in applauding its success in New Zealand—and Mrs. Shirley Brashier.
Questions arise from the report and from a recent article by Adam Raphael in The Observer. Mr. Raphael is a dedicated tennis player with a great knowledge of the game. Since the All England Lawn Tennis and Croquet Club finances the Lawn Tennis Association from the profits of the Wimbledon championship, does it give anything like enough money back to the game? Everyone acknowledges that the Wimbledon championship is excellently run and probably the most prestigious tournament in the world. However, we are entitled to ask whether, despite the sum of about £1·5 million that has


been given in the last four years, the All England Club is carrying out its obligations to the game in general. Is the All England Club too socially restricted a body to understand fully and feel strongly enough about the need to bring the game actively to schools and to youngsters from all backgrounds?
The Lawn Tennis Association was criticised in the report. For too long it has been run by a plethora of committees and part-timers, many of whom are elderly and come from traditional tennis-playing families. What steps have been taken to revolutionise the structure of the Lawn Tennis Association? The new chairman, Mr. Cochrane, is highly regarded, but if he is to do his job he must preside over a new streamlined organisation, with a paid full-time dedicated official in charge and a small committee with responsibilities for the day-to-day management. The report recommended that.
The report was highly critical about coaching facilities. How can the Lawn Tennis Association justify paying only about £31,000 per annum—if that is the correct figure, as reported—for coaching and training? In France £500,000 per annum goes on coaching and training. Young people need to be inspired by enthusiasm, and that enthusiasm must come from those who run the game. As the report points out, many of our ex-tournament players leave Britain to coach abroad.
What use has the Lawn Tennis Association made of those players, in an effort to encourage and inspire schoolchildren to play and improve their games? I am sure that players of the prestige and popularity of Roger Taylor or David Lloyd would be happy to spend some of their time running clinics and schools in parks and putting on exhibition matches there. In that way they could show youngsters that it is worth while to take part in the game to develop skills and to excel at the sport. Of course, they have to earn their living as players and coaches, but if they were asked I feel sure that they would be eager volunteers. Yet the LTA seems unwilling to enlist their help.
I know that one of the problems about tennis being taught in schools is that it is easier for sports teachers to supervise and involve 22 youngsters in football and cricket than four on a tennis court with the others looking on. It is up to the Lawn Tennis Association to inspire interest in and get the co-operation of teachers and local education authorities. I wonder whether it is doing enough.
It is true that school courts are sometimes infrequently used. It is sad that the dual use of courts by the public and schoolchildren has not meaningfully materialised. The report says that some of the private clubs which have both grass and hard courts—I am talking about the hard courts—are empty for most of the day. Why cannot the LTA discuss their use more persistently? Why cannot the courts be used for school children for an hour a week? Obviously they cannot be used to the detriment of the members so that members cannot play, but with so many courts lying idle with their excellent facilities it is a dereliction of an obligation to the game that schoolchildren of all backgrounds cannot use the facilities more often.
I know that there is a grass roots coaching scheme in the parks, but is the LTA organised enough to undertake proper scouting activities and to encourage the widespread formation of clubs in the parks so that youngsters can feel committed enough to keep playing? Feeling part of a team and club encourages youngsters to carry on playing and

trying to excel and compete. Is enough being done to encourage the game of short tennis, which is an excellent way of teaching youngsters the fundamentals of the game?
The report is a devastating indictment of the Lawn Tennis Association. The LTA has acknowledged its shortcomings. It appears to be far too dependent on the All England Club for its funds. It is an absurdity that the affiliation fee to the LTA from clubs until recently was only 30p. The report suggests that that should be increased to a realistic sum—£5 per annum for adults and £2 for juniors. I hope that the Lawn Tennis Association will grasp the nettle.
The other issue raised is that of sponsorship. I have sympathy with the All England Club in not wishing to change the peculiar and particular nature of the club by introducing sponsorship, but sponsorship has been discussed year in, year out. It could provide about £500,000 a year to lawn tennis. That is something that the All England Club should seriously consider.
I cannot go through all the criticisms in the report in the time available to me. But if lawn tennis standards are to improve in the same way as athletics standards have improved, it has to have a modem image. In the past it has been fuddy-duddy and nannyish. I hope that the report will do something to bring the administration of lawn tennis up to date, so that we can in the future have a Wimbledon champion. The great advantage of a champion is that he encourages other home players to try to emulate him.

The Under-Secretary of State for the Environment (Mr. Hector Monro): I welcome this opportunity to comment on British lawn tennis and to put into perspective the encouragement this sport is now receiving, both financially and practically, from the public and private sectors. I am grateful to the hon. and learned Member for Accrington (Mr. Davidson) for raising the subject. He was a fine athlete, was awarded his blue at Cambridge, and is now a very active tennis player and a member of the Queen's Club. As such I can well understand his concern, which is shared by many tennis followers, at the apparent lack of British success over the years. Perhaps I could take just a few minutes to reflect on this.
Not since the Fred Perry era of the middle 1930s have we had a men's singles winner at Wimbledon. Since the War, Mike Sangster and Roger Taylor have been semifinalists, although our ladies have been more successful, with Wimbledon championship wins by Angela Mortimer, Ann Jones and Virginia Wade, and with Christine Trueman a close runner-up.
We have not done much better in the doubles or mixed doubles, and in overseas tournaments our occasional winners have come from the same band of women. In team events our record is not outstanding—a win in the 1969 European zone final of the Davis Cup, six times winners of the Wightman Cup against America in 20 years, and twice runners up in the Federation Cup.
This is not, I agree, a tremendous record, but we should not lose sight of the fact that our home-produced players over the last 20 years have had the opportunity to compete at the highest level against the finest tennis players in the world. Perhaps we have all been a little too complacent, working on the assumpton that a British player must eventually come through and become a champion—something that has happened only very occasionally.
[The Under-Secretary of State for the Environment]
Now, hopefully, this complacency is to be cast aside. The magnificent Davis Cup tie win by our men in New Zealand last weekend will, I trust, augur well for the future, and I am sure that the House wishes Paul Hutchins and his team all the very best in the semi-final round against Argentina.
Following the concern expressed a few years ago by many people in tennis, my predecessor, the right hon. Member for Birmingham, Small Heath (Mr. Howell), set up a lawn tennis inquiry. The terms of reference were far-reaching and required the committee to consider both written and oral evidence from lawn tennis organisations, players and coaches, educational establishments and commercial interests. The evidence presented to that committee was, to quote the report, depressing, but the committee's single intention was to translate the suggestions and criticisms it had heard into constructive proposals.
The report was presented shortly before the 1980 Wimbledon championships, and I should like to place on record my appreciation of the work done by the committee, under the chairmanship of Mr. John Smith, the chairman of Liverpool Football Club and his colleagues. First reactions to the report were that it contained such an astringent list of recommendations that they were likely to be unpalatable to the Lawn Tennis Association. I am pleased to say that nothing could have been further from the truth.
The LTA grasped the nettle, ably demonstrated to me when shortly after publication the then chairman, Joe Pinnock, and his vice-chairman, Jim Cochrane, who is now chairman, discussed with me the report's implications. They indicated to me that they accepted some of the criticisms and promised positive action—a promise they have lived up to in the last year.
The two pressing issues were the structure of the LTA and the small subscriptions it received from playing members. The latter has been resolved, the players' contribution now being a realistic £l , an increase of 70p, and a junior contribution of 50p has been introduced. Restructuring of the association is in hand and a new, simplified and condensed committee structure has been drawn up.
It is proposed—this is subject to ratification by the association's AGM—that a board of management with 12 members, led by a working president, be responsible for tennis administration. This will be served by five committees whose terms of reference require them to report direct to the board of management. This, I believe, will constitute a marked improvement to the present somewhat complex procedure.
These two most important developments demonstrate, I believe, the positive action the LTA has taken, and this, coupled with the willing attitude of the Sports Council, local authorities and the private sector to work with them, has resulted in much progress being made in the last year—more so, I believe, than in the last 50.
The report also caused the media to ask some searching and at times totally biased questions concerning the All England Lawn Tennis and Croquet Club. We should all recognise that the Wimbledon championships are the premier championships of the world. This is acknowledged by the world's leading tennis players and administrators. It is expertly and efficiently managed by

the chairman, Sir Brian Burnett, and the committee of the All England Club, which is unique in British sport as being the major contributor, financially, to the governing body—the Lawn Tennis Association. A substantial sum—£411,455—was contributed by the club to the association in 1980. This is vital to the development of tennis.
Personally, I believe that it would be much more helpful to lawn tennis if the media, rather than attacking the club unfairly, highlighted the good points which make Wimbledon such a sporting and successful occasion. The All England Club should be congratulated, not castigated, on the part it plays in lawn tennis. It hosts, administers and stage manages the most famous and prestigious tennis tournament of all. It looks after dejected losers, petulant winners, abused officials, irate ticketless tennis fans, overworked police, attendants and stewards, and yet still manages to produce a tennis spectacular the like of which is not seen in any other country. I acknowledge that the lawn tennis committee report made a constructive criticism of the All England Club, taking the view that increased income could be obtained from the championships. I am confident that this suggestion will not be ignored by the club.
I referred earlier to the willing attitude of all the interested organisations, and I would finally like to highlight just what has been done to bring about the revival that will give our players—both established and "on the fringe"—the facilities and coaching that are necessary to reach championship level.
We should not, of course, lose sight of the fact that our climatic conditions are such that the need for indoor facilities is far greater than it is in some other countries. This prompts me to remind hon. Members, tennis administrators, players and spectators that we are constantly being told of the marvellous indoor facilities available in such European countries as France and West Germany. Yet neither of those countries was represented in the second week of Wimbledon—nor are they contesting, like Great Britain, the semi-finals of the Davis Cup. This leads me to believe that such facilities alone cannot manufacture top-class players. The will, talent and determination by the players themselves are of paramount importance, coupled to expert coaching.
However, indoor facilities inevitably cost appreciably more. One in particular is the exciting and imaginative scheme which David Lloyd and Slazenger are sponsoring at Hounslow in West London. This scheme, I am sure, will, given the right encouragement, be of huge benefit in the years to come. But this is but one of three schemes recently announced. The others are the Handforth lawn tennis centre, in the North-West and the Terry Mabbitt lawn tennis centre in the North-East near Darlington. The Sports Council has been financially involved in all three schemes, giving grants totalling £210,000 towards the cost of these new specialist indoor facilities.
These schemes are the first of a network of new regional indoor centres recognised by the LTA and supported by the Sports Council. In order to extend them, the Sports Council is seeking to promote partnership schemes between local authorities, the private sector and other groups. This is essential for the raising of standards at all levels and, I believe, particularly at club level, which is a most important stepping-stone to international standard.
This sudden development of facilities has been augmented by the recent announcement that an existing


national sports centre—Bisham Abbey—is to become the base for the Lawn Tennis Association training centre. Discussions about such a centre have been going on for many years and I am sure we all applaud the decision finally taken to proceed with such a venture. The sports hall facilities at Bisham Abbey stand firmly alongside the best in Europe. Indeed, it is my belief that they are the best, and it is exciting and encouraging that tennis is taking advantage of this marvellous centre.
I have talked about facilities which we hope will provide the right conditions and training expertise to produce champions. We must not forget where these champions originally come from—the grass roots of lawn tennis, as highlighted by the hon. and learned Member for Accrington, where interest can be stimulated by youngsters playing at an early age on public courts and in schools. I pay tribute to all the volunteers who help to run sports clubs and do the initial coaching. Both local authorities and the Sports Council have worked together in producing courts for young people to play.
There are small schemes taking shape around the country, allied with other sports, which will, I hope, give youngsters the incentive to play tennis and, with the right coaching, go to the top. In the five years 1976 to 1981 the Sports Council has given grants or loans to local voluntary organisations to provide tennis facilities to a sum of £750,000.
It is on those courts that future players will be found and now that we are developing centres to enable them to progress further, I am hopeful they will not just encourage players but will provide champions as well.
I conclude, as did the hon. and learned Gentleman. on the point about leadership. Nothing will happen without stimulating leadership that will develop enthusiasm and take these youngsters who are given the opportunity of coaching, sometimes sponsored by commercial companies, right through from school, where I accept that wonderful facilities are under-used. I cannot overemphasise the importance of the dual use of sports facilities at schools.
I believe that the LTA, supported nobly by the All England Club, has the leadership and the new—found determination to give that leadership to lawn tennis in this country. I shall do all I can to ensure that the council fulfils as many as possible of the points in the lawn tennis report. So far, I have not found any lack of enthusiasm by the LTA to do just that. I am much more confident about the future than many people who write in the press about lawn tennis in this country.
I end by wishing good luck to our Davis Cup and Wightman Cup teams this year. Let us look forward to a steadily rising standard of tennis in Great Britain.

Question put and agreed to.

Adjourned accordingly at two minutes past Four o'clock am.